What are qualified educational expenses?
These expenses include tuition, mandatory fees, books, supplies, and equipment (including computers) required for enrollment or attendance; room and board during any academic period the beneficiary is enrolled at least half-time; and certain expenses for a “special needs” student. Reference IRS Publication 970 for more detailed information on eligible expenses at www.irs.gov/publications/p970/index.html.
Generally, qualified educational expenses are payments for tuition made directly to an educational organization which maintains a regular faculty, regular curriculum, and an enrolled student body. For example, the direct payment of $15,000 to your grandchild’s college or university for his or her tuition would be a qualified educational transfer. If in the same year, you also made a $10,000 annual exclusion gift to your grandchild, you would have effectively transferred $25,000 for your grandchild’s benefit without making even $1.00 in taxable gifts. What are qualified medical expenses? Qualified medical expenses are payments made directly to a person or entity providing medical care. Under federal tax law, medical care is a broad term which includes not only the diagnosis, treatment, and prevention of disease, but also includes transportation essential to that care, medical insurance premiums, prescription drugs, certain long term care services, and insurance covering long term care.
