Please Help, and I apologize in advance if I sound ignorant about taxes.
I have a freshman S and he received $5K+ in Fin Aid for summer session, and $12K+ for Fall session.
(will receive another 12K in spring)
I was trying to do the FAFSA for both him and my Senior HS son and found out I have to
report the Grants and Scholarships that he received as income. I didn’t know that.
We are low income at $37ooo a year. I don’t know how to do an estimate on the FAFSA for
the Grants and scholarships? Do I just ad $17K to my income?
and what’s an
“American Opportunity Tax Credit or Lifetime Learning Tax Credit”?
I tried to Google it, and came up with another question:
What’s a 1098T form? and can I submit my FAFSA with it?
I just read someone’s post stating their D was going to have to file her own taxes if she did work
study and got Fin Aid.
Does this Fin Aid go under my taxes or does my son have to file his own taxes?
(He didn’t do work study the 1st semester, but will be starting it this month)
It definitely seems like I’m going to have to hire a professional to do my taxes this year.
My question to you all is;
"How do I figure the estimated amounts to put on the FAFSA under;
“Education Credits”?
and “Grant & scholarship aid reported to the IRS in your parents 2014 taxes”?
Did his grant and scholarship amount received in 2014 exceed the cost of tuition, mandatory fees and required books and supplies for 2014? Only if it did would the excess amount be taxable income to him. We can give more details if it did, but answer that question first.
The IRS bible for education topics is Pub 970. It covers taxable scholarships and the education credits and deductions.
The 1098T is an advisory document the school issues in January telling you what they billed for qualified education expenses and how much they credited in scholarships and grants in the previous year.
YOU are not reporting the amount in excess of tuition/fees/books, your child is on his tax return and on his FAFSA.
He can decrease the amount he has to report by what he spent on books/supplies required for his classes. So $7,900 minus the books.
Note that when his FAFSA is completed, he is not ‘penalized’ for having to report the $7900 in taxable income. There is a place on the FAFSA to enter the amount of taxable scholarships so that this amount can be taken out of the EFC calculation.
It would really behoove you to read Publication 970.
Qualified education expenses. For purposes of tax-free scholarships and fellowships, these are expenses for:
Tuition and fees required to enroll at or attend an eligible educational institution, and
Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. These items must be required of all students in your course of instruction.
Expenses that do not qualify. Qualified education expenses do not include the cost of:
Room and board,
Travel,
Research,
Clerical help, or
Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution.
I would worry about your HS senior’s fafsa right now and get that submitted. Your college son probably has a little more time to get it submitted while you figure this out.
Have your college son check his email to see if there is notification of 1098T availability. Often they are online and the email will explain how to access it. It would be a good check on your figuring to see what the school shows for QEE and scholarships/grants. Unfortunately, schools aren’t required to provide a 1098T when scholarships/grants exceed QEE billed by the school. But they still may provide one.
If in fact he does have to file a return, the amount of taxable scholarships/grants reported on his return(you can’t report it), is entered on fafsa question 44d. That amount will be subtracted from his AGI so he isn’t penalized for it by fafsa.
To confirm, your saying that my son now has to file his own taxes for the taxable amount?
Then why does it ask this on the FAFSA under PARENT info?
American Opportunity Tax Credit or Lifetime Learning Tax Credit
Education credits (American Opportunity Tax Credit or Lifetime Learning Tax Credit) from IRS Form 1040-line 50
$0 .00
**If I don’t claim it on MY taxes, then how would I get Education Credits?
AND it asks:
Grant and scholarship aid reported to the IRS
Student grant and scholarship aid reported to the IRS in your parents’ adjusted gross income. Includes AmeriCorps benefits (awards, living allowances, and interest accrual payments), as well as grant and scholarship portions of fellowships and assistantships
$ 0.00
**it asks “Student grants…reported in…Parents AGI…”
it doesn’t make sense that we should have to both report the income?
I am trying to do my HS seniors son FAFSA at the same time.
and its asking me the same question. That’s why I need the answer ASAP.
I know I should have his FAFSA submitted yesterday!!
Did your student take any loans? Those are not counted as “Financial Aid” for tax purposes.I would look at the bills for summer and fall, add up all the qualified expenses (tuition, fees and books - which are not on the bill), then add up all the “free” money (grants/scholarships not loans). If the first number is larger then you will put the difference on your son’s taxes - he will have a standard deduction so the taxes should not be that much.
On the FAFSA inline 44d put the taxable amount from son’s taxes (as mentioned above).
You will have 0 for the American Opportunity Credit and for the Grants reported in parents income.
You may be able to do more complicated maneuvers to get some of the American Opportunity Tax Credit - but start with the steps above.
Make sure when you file son’s tax return that you note the income is from scholarships (you do this according to these directions from Publication 970 linked above:
“If you file Form 1040EZ, include the taxable amount in the total on line 1. If the taxable amount was not reported on Form W-2, also enter “SCH” and the taxable amount in the space to the left of line 1”
It asks about this for both parents and students. Some parents may be in college and have to report taxable scholarships and grants for themselves on the parent return. The student question doesn’t say reported on the parent return.
You need to know exactly how much was spent on books and supplies. Have receipts or be able to get them still.
Are you saying the terms of the scholarship or grant required it be used for room and board or did the school just apply it like that. It makes a difference, if the latter you can apply it however you want.
On the facts presented there is no credit, Newenglandmother did say there are more complicated maneuvers to claim at least part of the credit which is what you are bringing up. And with a parent income of $37k, the kiddie tax scenario probably isn’t going to affect those maneuvers much if at all.
Only parents can get the AOTC. You can get it on your return based on qualified expenses you paid for a dependent’s education. It’s not related to your son having to report taxable scholarships/grants on his return except that expenses have to be reduced by tax-free scholarships and grants the student received.
Kids2smart4mom, can you please post to tell us the following:
How much was billed for tuition and fees in summer
How much was billed for tuition and fees in fall
How much in GRANTS and SCHOLARSHIPS (not loans or work study) was paid to your child’s account in summer
How much in GRANTS and SCHOLARSHIPS (not loans or work study) was paid to your child’s account in fall