For use in Preparing 2004 Returns
Introduction, Useful Items and Important Changes

Chapter 1
Scholarships, Fellowships, Grants, and Tuition Reductions

Scholarships and Fellowships

Tax-Free Scholarships and Fellowships
Taxable Scholarships and Fellowships
Reporting Scholarships and Fellowships

Other Types of Educational Assistance

Fulbright Grants
Pell Grants and Other Title IV Need-Based Education Grants
Payment to Service Academy Cadets
Veterans' Benefits
Qualified Tuition Reduction

Chapter 2
Hope Credit

Can You Claim the Credit

Who Can Claim the Credit
Who Cannot Claim the Credit

What Expenses Qualify

Qualified Education Expenses
No Double Benefit Allowed
Expenses That Do Not Qualify

Who Is an Eligible Student

Who Can Claim a Dependent's Expenses

Figuring the Credit

Effect of the Amount of Your Income on the Amount of Your Credit

Claiming the Credit

When Must the Credit Be Repaid (Recaptured)

Illustrated Example

Chapter 3
Lifetime Learning Credit

Can You Claim the Credit

Who Can Claim the Credit
Who Cannot Claim the Credit

What Expenses Qualify

Qualified Education Expenses
No Double Benefit Allowed
Expenses That Do Not Qualify

Who Is an Eligible Student

Who Can Claim a Dependent's Expenses

Figuring the Credit

Effect of the Amount of Your Income on the Amount of Your Credit

Claiming the Credit

When Must the Credit Be Repaid (Recaptured)

Illustrated Example

Chapter 4
Student Loan Interest Deduction

Student Loan Interest Defined

Qualified Student Loan
Qualified Education Expenses
Include As Interest
Do Not Include As Interest
When Must Interest Be Paid

Can You Claim the Deduction

No Double Benefit Allowed

Who Can Claim a Dependent's Expenses

Figuring the Deduction

Effect of the Amount of Your Income on the Amount of Your Deduction
Which Worksheet To Use

Claiming the Deduction

Chapter 5
Student Loan Cancellations and Repayment Assistance

Student Loan Cancellation

Qualifying Loans

Student Loan Repayment Assistance

Chapter 6
Tuition and Fees Deduction

Can You Claim the Deduction

Who Can Claim the Deduction
Who Cannot Claim the Deduction

What Expenses Qualify

Qualified Education Expenses
No Double Benefit Allowed
Expenses That Do Not Qualify

Who Is an Eligible Student

Who Can Claim a Dependent's Expenses

Figuring the Deduction

Effect of the Amount of Your Income on the Amount of Your Deduction

Claiming the Deduction

When Must the Deduction Be Repaid (Recaptured)

Chapter 7
Coverdell Education Savings Account (ESA)

What Is a Coverdell ESA

Qualified Education Expenses

Contributions

Contribution Limits
Additional Tax on Excess Contributions

Rollovers and Other Transfers

Rollovers
Changing the Designated Beneficiary
Transfer Because of Divorce

Distributions

Tax-Free Distributions
Taxable Distributions
When Assets Must Be Distributed

Chapter 8
Qualified Tuition Program (QTP)

What Is a Qualified Tuition Program

How Much Can You Contribute

Are Distributions Taxable

Figuring the Taxable Portion of a Distribution
Additional Tax on Taxable Distributions

Rollovers and Other Transfers

Rollovers
Changing the Designated Beneficiary

Chapter 9
Early Distributions From IRAs

Who Is Eligible

Figuring the Amount Not Subject to the 10% Tax

Reporting Early Distributions

Chapter 10
Education Savings Bond Program

Who Can Cash In Bonds Tax Free

Figuring the Tax-Free Amount

Effect of the Amount of Your Income on the Amount of Your Exclusion

Claiming the Exclusion

Illustrated Example

Chapter 11
Employer-Provided Educational Assistance

Chapter 12
Business Deduction for Work-Related Education

Qualifying Work-Related Education

Education Required by Employer or by Law
Education To Maintain or Improve Skills
Education To Meet Minimum Requirements
Education That Qualifies You for a New Trade or Business

What Expenses Can Be Deducted

Transportation Expenses
Travel Expenses
No Double Benefit Allowed

How To Treat Reimbursements

Accountable Plans
Nonaccountable Plans

Deducting Business Expenses

Self-Employed Persons
Employees
Performing Artists and Fee-Basis Officials
Impairment-Related Work Expenses

Recordkeeping

Illustrated Example

Chapter 13
How To Get Tax Help

Appendices

Appendix A. Illustrated Example of Education Credits

Glossary