My question is, how do I establish that my student loan was for qualifying expenses? If say I got a 5000 dollar Direct Consolidation Loan debt that I paid 300 dollars worth of interest on, how do I prove that all of the 5000 was for approved expenses, if the goverment happens to audit it. The wording of this deduction seems conflicting. On the one hand, it says: The deduction is claimed as an adjustment to income so you do not need to itemize your deductions on Schedule A Form 1040. Which would seem to indicate that you don't have to prove the expense was valid as long as the loan you recieved was one that must always be used for educational expenses. However, then it goes on to say that: Qualified Education Expenses For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. They include amounts paid for the following items. Tuition and fees. Room and board. Books, supplies, and equipment. Other necessary expenses (such as transportation). This seems like all of the loan would then qualify, am I right or am i missing something, why are they making a point about "educational expenses"? What do I need to guard myself against?
Maybe I'll answered my own question: Costs you incur have to be reduced by: Non–taxable employer – provided educational assistance. Non–taxable distributions from a Coverdell education savings account, Non-taxable distributions from a qualified tuition program (QTP), U.S. Savings Bond interest that is non–taxable because it is used to pay qualified higher education expenses, The non-taxable part of scholarships and fellowships, Veterans educational assistance, and Any other non–taxable payments (other than gifts, bequests, or inheritances) received for educational expenses. Which means all other expenses are vaild but these?
