1098T and AOTC

Paying for College
1

Can anybody walk me through this–please?
D’s 1098T has billed tuition/fees at $47779 and Scholarships at $55763.

Is this correct? Thanks, @Madison85 for the template from another thread?

Form 1040:
Income from Wages $1100
Unearned Income from Scholarship $7384 ($55763-$47779 and additional QEE of $600 for laptop/books)
AGI $8484
Less: Standard Deduction ($6,300)
Taxable Income $2184

Form 8615:
Unearned Income $7384
Less: Allowed Unearned Income ($2,100)
Net Unearned Income $5284
Taxable Income from Form 1040 $2184

Lesser of Net Unearned Income or Taxable Income $2184

$2184 paid at Parent’s rate

Is this correct?
Also, is a laptop considered a QEE?

Is there a way for me (filing jointly with husband) to claim AOTC. We paid $2600 to the school but it doesn’t look like it was applied to tuition.
I am thinking I would subtract that amount and other QEE from D’s billed tuition number–increasing her unearned income??? I think this would be worthwhile for us if I am correct. The scholarship amount includes a $2663 Pell Grant if that is relevant, which I think it may be but an unsure of why…

thank you!

2

Basically, all your questions are ‘Yes’ It looks like you are figuring it correctly, except that your 1098T numbers seem to be including both fall and spring semesters. If you want to include them like that you can, but it is also allowed to take the tuition and financial aid in the tax year used.

The Pell grant is counted as a scholarship. It doesn’t make any difference if the award was a need based grant or state grant or merit or a private scholarship (don’t include any loans), it all gets counted as ‘scholarship’.

The rules on laptops changed, but I think they can be counted now. Also can be counted if school required a laptop under old rules.

Yes, you could take the AOTC by ‘moving’ $4000 of the scholarship offset to taxable (increase her unearned income to $11, 384. She’ll pay taxes on that at your rate, but you’ll get a $2500 credit (if you have $2500 in tax liability)

3

Thank you @twoinanddone .

Is it allowable to just pull the whole $4000 from the tuition billed amount and claim it as paid tuition in our return Or does the number have to be something that we actually paid(in our case $~2200 plus $600 other QEE)?do I need to show the change in the 1098 or is that not necessary? Thanks all!

4

If you move up to $4000 in aid to taxable, it is taxed on your daughter’s 1040 (and Form 8615), not on your 1040.

5

Oh Yes thank you-
I just wasn’t sure how to note it on the 1098 for her return or if I needed to.

And also if just taking $4000 off the tuition amount is necessary or should I take off the difference of. 4K and what I paid the school. (I think the total amount of 4K is correct since what I paid wasn’t applied toward tuition but wanted to be sure.)

For our 1040 we would just enter $4000 as a tuition expense and don’t need backup documentation?(a copy of edited 1098)

6

I don’t think you need to edit the 1098T.

You might have to see if any of the scholarships have any restrictions on what they can be used for.

For example some might be for tuition, or room and board only.

If not you should be able to shift the $4000 QEE to you the parents for AOTC and have DD report $4000 more as taxable on her return.

Now don’t forget the net unearned income she has will be taxed at the parent tax rate.

You will have to do your return first, then hers.

Turbo tax and Taxact should do a good job on helping you figure out this scenario if you know what to enter.

Not sure about computer being QEE for AOTC, I thought only if school required it for attendance.

7

https://www.irs.gov/uac/American-Opportunity-Tax-Credit:-Questions-and-Answers

see question 7

8

The tax software interview asked us about 1098 numbers and how much was paid towards books and also how much towards unqualified expenses. Then it calculated how much in qualified expenses was left to claim for AOTC.

So for you it might look something like this

tuition and fees billed $47,779
Books $600

QEE $48,379

Unqualified expenses $11,384 (covered by scholarships and Pell grant/what D will report on her 1040)

remaining scholarship amount $44,379 ($55,763-$11,384)

-QEE $48,379

= QEE reduced by scholarships, can be claimed for AOTC $4,000

9

It doesn’t really matter that you paid the school $2200. The school just plops all the money into the same pot, and pays the bill from that. If your $2200 was used for tuition, then $2200 of scholarship money was used to pay r&b, and that’s taxable. If your $2200 was used to pay R&B, then it’s not QEE and can’t be used for AOTC anyway. It just doesn’t matter.