GI Bill and Taxes?

Question

My father in law says that if the GI Bill money received was used for living expenses instead of tuition, one can still claim the lifetime learning credit on their taxes? Is this true? Military.com says living expenses are a legal use of the funds. Thanks for the help.

Answer 1

Living expenses might be a legal use of the funds, but that doesn't give you an education credit for those expenses. But if you're saying you used the GI Bill money for living expenses and paid your tuition out of your own pocket, then yes you could claim the education credit for your tuition and fees.

Answer 2

The GI Bill qualifies as a grant or scholarship. The IRS sees all money coming in as going into a common pot and then dispersments being paid from that. It is always assumed that tuition will be the first thing paid from any scholarship/grant and therefore even if you paid the tuition three months before you received the money from the GI bill that money simply replaced the dollars already spent and therefore was really used for the tuition. Only if your qualified tuition exceeded what you received from the GI bill and then only the amount in excess would be eligible for the Education Credit.