1098-T and AOC

[Max W]

Dependent has $16,000 scholarship/grants, etc in excess of tuition, which means $16,000 taxable income.

As I understand in, the parent can take $4000 of that  income and claim the full $2500 credit.  The dependent would take $12,000 as taxable income.

Any comments please.

[Slippery Pencil]

Kiddie tax.

Get the account statement.  1098Ts are notorious for being wrong.  Also determine if the scholarships for the whole academic year were posted to the account in September 24 but covered both the fall & spring semester while the Spring 25 semester tuition was paid in January 25.

[Max W]

2 hours ago, Slippery Pencil said:

Kiddie tax.

Get the account statement.  1098Ts are notorious for being wrong.  Also determine if the scholarships for the whole academic year were posted to the account in September 24 but covered both the fall & spring semester while the Spring 25 semester tuition was paid in January 25.

The 1098 has all the detail and everything was paid in 2024.

[BrewOne]

Max, I guess I don't follow, because it looks like you're making some of the scholarship non-taxable and using it for a credit.  But it could be that it's April 9th...

[Pacun]

You only need to make taxable $4000, so it will be impossible that out of $16,000 the 1098-T is so wrong and nothing was paid for last year. 

I believe you have to check if the scholarships can become taxable. 

I also believe you can file student return with $4000 taxable and on the parents return select "taxable scholarship reported somewhere" or something like that. 

 

[TexTaxToo]

You must make taxable a part of the scholarship that was or could be used for tuition, in addition to the amount in excess of tuition.

For example, if tuition was $24,000 and unrestricted scholarships were $40,000  ($16k in excess of tuition which was used for room and board).  If you make $20,000 of the scholarship taxable to pay nonqualified expenses, that leaves $20,000 to apply to the tuition, and that leaves $4,000 of tuition available for the credit.

The scholarship terms must allow that $20,000 to be used for nonqualified expenses and it would be taxable to the student.

And pay attention to Slippery Pencil re. kiddie tax and getting an accurate statement of account - was the scholarship actually used for qualified expenses in another year, or was it for room and board in the current year.

 

[Lion EA]

Tex explains it well.

Any required fees/books/equipment?

 

[Max W]

On 4/9/2025 at 8:24 AM, TexTaxToo said:

You must make taxable a part of the scholarship that was or could be used for tuition, in addition to the amount in excess of tuition.

For example, if tuition was $24,000 and unrestricted scholarships were $40,000  ($16k in excess of tuition which was used for room and board).  If you make $20,000 of the scholarship taxable to pay nonqualified expenses, that leaves $20,000 to apply to the tuition, and that leaves $4,000 of tuition available for the credit.

The scholarship terms must allow that $20,000 to be used for nonqualified expenses and it would be taxable to the student.

And pay attention to Slippery Pencil re. kiddie tax and getting an accurate statement of account - was the scholarship actually used for qualified expenses in another year, or was it for room and board in the current year.

 

The majority of what the dependent received were Pell grants and they can be used for room and board, books, and tuition.

The statement is very clear that all expenses occurred and paid in 2024 for winter, spring and fall semesters.