When determining the amount of the withdrawal that is not subject to the 10% additional tax, include qualified higher education expenses paid with any of the following funds.

1. An individual's earnings.
2. A loan.
3. A gift.
4. An inheritance given to either the student or the individual making the withdrawal.
5. Personal savings (including savings from a qualified state tuition program).

Do not include expenses paid with any of the following funds.

1. Tax-free withdrawals from an education IRA.
2. Tax-free scholarships, such as a Pell grant.
3. Tax-free employer-provided educational assistance.
4. Any tax-free payment (other than a gift, bequest, or devise) due to enrollment at an eligible educational institution.

Qualified higher education expenses. These expenses are tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. In addition, if the student is at least a half-time student, room and board are qualified higher education expenses.

Eligible educational institution. An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. It includes virtually all accredited, public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. The educational institution should be able to tell you if it is an eligible educational institution.

Half-time student. A student is enrolled "at least half-time" if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing as determined under the standards of the school where the student is enrolled.

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