The credits for education are based on eligible expenses paid in the current year for academic periods beginning in the current year and/or the first three months of the following year. In a recent case, a student paid tuition of $5,895 in December 2011 for the spring 2012 semester that started February 1.
The student voluntarily made the payments early because the funds were available and he wanted to be sure the spring semester fees were paid. He used these payments to claim the American Opportunity credit in 2012. The IRS disallowed the credit ruling the credit had to be taken in 2011. The U.S. Tax Court upheld the IRS on the grounds that the credit can be taken only in the year the expenses are paid [Lucas Matthew McCarville. TC Summary Opinion 221614].
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