Somehow my husband and I can never quite get on the same page when it comes to keeping documents for tax time. He does the bills and I do the taxes, so it’s likely my fault for not communicating exactly what I’ll need for taxes.
For next year, I’ll have an extra consideration - college expenses. I’m going to need to be able to back up our 529 withdrawals and scholarships. If we were using other sources to pay for college, we’d need to back those up with documentation as well.
Any tax advantaged source of money used to pay for college needs to be supported by a qualified college expense. It’s tax advantaged if you get any kind of deduction, credit or tax penalty exception for using the money to pay for college. It’s a qualified college expense if the IRS says so, and they define it differently depending on the particular deduction, credit or penalty exception you’re using.
Keeping good records is going to be important because you can’t “double dip”. You can’t use the same college expense to support more than one tax benefit.
I decided to get down to the bottom of just what was what this week, and this is the result. I hope it makes your life easier for taxes next year.