Amends section 25A of the Internal Revenue Code to expand the definition of qualified expenses in subsection (f)(1), remove an existing subparagraph, and add new subparagraphs defining child and dependent care expenses and computer or peripheral equipment (including a $1,000 annual limit); also makes changes to subsection (g)(5) (heading and insertion of additional text).

Modifies 26 U.S.C. §117(b)(1) to add an explicit exclusion from gross income for amounts received as Federal Pell Grants under section 401 of the Higher Education Act of 1965.

Alters the language in 26 U.S.C. §25A(g)(2)(A) to limit the phrase referring to a "qualified scholarship" to those described in section 117(b)(1)(A), thereby excluding scholarships described elsewhere in §117 (such as Pell Grants added to §117(b)(1)(B)) from that reference for purposes of the American Opportunity and Lifetime Learning credits.