<p>OK, I feel embarrassed to have this problem as my daughter is a college junior and I've done this but this year's 1098-T is different.</p>
<p>In her Spring 2010 semester, she received scholarships/grants that covered all but $2192 of her cost of attendance (including room & board). In Fall 2010, because our financial situation worsened over the summer and her fin aid package was adjusted, she ultimately received a financial aid overage of $1787 from costs of attendance. I was expecting to receive a 1098-T with the amounts paid in Box 1 and the amounts of scholarships for two semesters in Box 5, which I could have figured out. But, the 1098-T showed this Spring 2011 tuition and fees as wel in Box 1, but just scholarships/grants in Box 5 for the 2010 semesters. I approved and therefore "paid" that tuition bill in November 2010 (again, scholarships/grants would result in a smaller overage this semester). So, technically it was deemed "paid" in 2010 but the money to cover it (scholarships/grants only, nothing out of pocket from us) wasn't applied until Jan. 2011, so it will be on the 1098-T for 2011 (I'm assuming!). She does have some expenses to deduct that I haven't fully calculated yet.</p>
<p>So how do we report this? First, let me say we claim her as a dependent and she isn't filing a return of her own. So it's on our return. So...I realize that if just the 2010 actual academic semesters were on the 1098-T, we'd show a discrepancy of about $3001 from what we paid and what she received in assistance, etc. before we figured any qualified expenses. But, if we are keeping this semester's payment in our 2010 return, then won't we have two semesters of scholarships/grants for 2011 and just one semester of tuition (assuming I don't "pay" her final semester of 2012 until Jan. 2012)on next year's 1098-T? Or will it show as an adjustment on it? She also took two summer classes at a different school last year, so we have the 1098-T for that, which is just a straight amount billed and amount paid, no scholarships, etc. Getting an education tax credit is important to me if possible, but not as important as filing all of this correctly. It's literally making my head spin.</p>
<p>1098s are done differently from school to school, but it sounds like your school changed how they reported after your D started, that makes it even more confusing.</p>
<p>My D1s school does it like yours does, spring tuition is billed/paid in Nov, but FA grants aren’t credited until Feb, so there’s an offset between tuition and grants on the 1098. You’re correct about the problem the final year with more semesters of grants than tuition showing on the 1098. My solution was to hold back on that 1 semester of tuition so that each tax year tuition and grants are kept together. So for instance, for 2010 taxes, I used tuition and grant numbers for spring 2010 and fall 2010 even though the 1098 reports tuition for fall 2010 and spring 2011. She graduates this year, so for next years taxes I’ll have tuition and grants for spring 2011 to report. Here’s a past thread that also contains a helpful link to another thread:</p>
<p>Wait…why would you claim this excess income on your own return? It makes no difference that she’s your dependent, the 1098 is in her name and SSN and she needs to file a return if she meets the IRS criteria (I assume she would since her excess grants/scholarships were enough to cover R&B). She will have her own standard deduction though, so the amount of taxable income will be lower than that and the tax rate is certainly more favorable.</p>
<p>
</p>
<p>You can take the AO tax credit on your own return (your D cannot as she’s a dependent) if you have paid qualified expenses…it doesn’t sound as if you did though I’m unclear about the way you’ve worded some things, especially this part:</p>
<p>
</p>
<p>Since you didn’t actually pay (out of pocket) any 2011 expenses in 2010, I think it would be much cleaner if you set aside the 1098 and simply calculate what her actual 2010 grants/scholarships and her 2010 qualified expenses were, including books and her summer classes. Those are the numbers you want to use for this year’s tax forms. Once you have those figures, you can see if it’s possible to take a tax credit and what her gross and taxable income will be.</p>
<p>Thank you both. I think we have a good idea of what we should be doing now (besides pulling my hair out!). Thank goodness this is just once a year!</p>