Hello all, my brother claims me as a dependent on his taxes, so will claim AOTC on my behalf. My question is, I have qualified education expenses of ~3000 and scholarships of 5500. Can I file a 1040ez and claim the 5500 as taxable income so my brother can claim the 3000 for the tax credit? My tax liability would still be zero because it falls under the personal exemption amount. Thanks!
^Yes, you may do that. See http://www.irs.gov/publications/p970/ch02.html.
However, you need to make sure your brother could claim you as a dependent. Do you have parents? Are your brother and you live away from your parents? Also, if you live away from your parents for education, you may still live with your parents on the tax returns.
Finally,
If your brother claims you, then you don’t have your personal exemption.
Thank you, my circumstances are that I live with my brother when I am not at school. He provides more than half of my support to claim me as a dependent. As to the personal exemption maybe I have the term confused but whatever the standard deduction of ~5800 dollars is
Also you need to make sure the scholarships can be used on non-qualified expenses.
Personal exemption = $3950
Standard deduction=$6200
If your brother is eligible for the AOTC based on HIS income and taxes owed, yes, you can declare the $3000 in QEE as taxable scholarship on your return. You also have to declare the $5500 that wasn’t used for QEE, plus any income you earned will take you over the standard deduction ($3000 + $5500 + earnings), so you’ll have to pay taxes.
No, he doesn’t have to declare both the $3000 and $5500 as taxable scholarships, just the $5500 + any other income. Why would he report the QEE amount as taxable? As it stands, he has $2500 of taxable scholarships and instead he would report $5500 to ‘free-up’ the $3000 of QEE. OP, you can also add the cost of required books and supplies to the $3000 of QEE for the AOTC for your brother.
Because I thought he wanted to have $3000 for the AOTC. If he doesn’t declare it all, he won’t have paid anything for QEE to get the AOTC.
Here’s how I read it:
OP has $3,000 in QEE. He has scholarships of $5,500 which pay that $3,000 in QEE, plus $2,500 extra, which are taxable anyway. So if he declare the entire scholarship amount of $5,500 taxable, he now has $3,000 in QEE that can be used to get most of the AOTC. As annoyingdad points out, there may be extra QEE out there such as required books and supplies that can be added to the $3,000 to boost the AOTC.
Middkidd yes you are reading it correctly. I have saved receipts from buying books. Still waiting on my 1098t from school to get the exact numbers