Then she can’t use the $600 as QEE in determining the son’s taxable scholarship amount. It’s analogous to declaring more of the scholarships/grants taxable by applying them to R&B and saying more of her out of pocket went to QEE. Complicated is in the eye of the beholder.
@kelsmom -Thank you for your help!
My #1 sons info:
Summer= T & F $3,024
Fall= T & F $6,486
Summer= G & S Aid $4,436
Fall= G & S Aid $12,883
I made school bill payments for the rest of housing, meals etc., that I guest are not deductible
and paid approx. $600 for books.
No Loans
No Work Study
Parent Income $37,000 (family of 4)
Student Income $0 (Has never filed own taxes 19yrs old)
Additional FAFSA being done for #2 son, High school senior 17 yrs old.
Questions are:
So if now all of this info is going to be under my older sons taxes, I just wait
till I get the 1098T form that the schools website says will be posted Jan 31and do #1
sons FAFSA then?
and none of this info that we’re talking about is going to affect my AGI, so I can go ahead and do #2 sons
FAFSA now???
THANK YOU AGAIN!
Given those numbers, your son has $7209 in taxable scholarships/grants. $17319 in scholarships/grants minus 10110 in QEE. Understand that if he filed a 1040ez return with those numbers and as a dependent on your return he would still get his standard deduction of $6200 and only owe tax on $1009. As a dependent on your return he doesn’t get his exemption. With those numbers you would not be able to take the AOTC.
The only things on younger son’s fafsa for your info that could be affected by your older son’s situation is how much tax you wind up paying and how much education credit you may take. At this point fafsa is just an estimate which will be finalized when everyone’s taxes are filed. I would estimate your tax owed and for now put 0 for the education credit that you will take and submit younger son’s fafsa.
As mentioned in previous posts there is some legal manipulating you can do so that you could take some amount of AOTC credit. As mentioned it is a little complicated but probably worth it. Your son could declare more scholarships/grants as taxable by saying they went toward room and board, then you can say the payments you made went to QEE and take the AOTC on that amount. A credit to you is almost always more than the extra tax your son would owe. There is a new wrinkle in recent years that your son may have to file form 8615 for the kiddie tax if his taxable income is over $2000. But in your income bracket that may not result in any extra tax for him.
Agree with the above.
I thank you all so much for your help. This is such an awesome site, with wonderful people!
I will definitely take your advice.
If I may ask one more quick question, what does QEE stand for exactly?
Thank you again.
QEE = Qualified Education Expenses, a term relating to tax filing. See IRS pub. 970:
Running a tax estimator with a family of 4 with income of $37,000, it shows only about $8800 in taxable income (standard deduction and 4 exemptions total $28,200) and tax at $883. Also it shows an estimated earned income credit at $2,500. Even if the family had no tax withheld, they should receive a refund.
According to this link only 40% or up to $1,000 of the AOTC is refundable.
http://www.irs.gov/uac/American-Opportunity-Tax-Credit:-Questions-and-Answers
So if you can’t get the full credit, would it be worth it to include more of the scholarships in son’s income as taxable and therefore increase his tax also?
I did it both ways when trying to figure out if I should move scholarships to my D’s income a few years ago. For us, it was worth it … the AOC was worth more for us than the tax hit for her. You also have to consider any state tax hit, if your state has an income tax (ours does, so she had to also report the scholarship income on the state return). OP can try it both ways to see what works best for their particular situation.
We live in California, and my son goes to a public UC if that matters.
Go Bears! 
It only matters in that you need to check into how CA handles taxable scholarship/grant amounts for state tax.
While the IRS considers taxable scholarships/grants as earned income for the purposes of determining whether a student has to file and for the standard deduction, my state(not CA) treats them as unearned income. That is one of the differences that can arise.
I thought scholarships were now UNearned income for federal purposes?
I believe there are two federal ‘purposes’ -
- Scholarships are unearned income for kiddie tax purposes
- Scholarships are earned income to determine whether a student has to file and the standard deduction amount
That’s right. Purpose 1) is in the instructions for form 8615, purpose 2) is in Pub 501 on page 3.
My Daughter didn’t take any loans, She received grants and did earn some though workstudy. Does she have to file Taxes?
2nd, if the amount of grants was more than the tuition and other expenses such as books etc. The excess amount is taxable. correct? Can either parent or student include this on their taxes or it must be included on student’s return?
It depends on the amount of income. Start reading on page 3 under Dependents in IRS Pub 501.
http://www.irs.gov/pub/irs-pdf/p501.pdf
Only investment income can be reported on a parent’s return. Taxable scholarships and work income must be reported on the student’s return if required to file. Yes, it’s just the excess over the QEE of tuition, fees and required books and supplies. This thread and the thread you started referred to IRS Pub 970 for educational tax matters:
If Student is not required to file return(income is below filing amount), no investment income etc and parent can claim student as a dependent then all of taxes can be dealt with through parent’s tax return including taxable scholarship/ education credit etc. Is this understanding correct?
If the total of student income including taxable scholarships/grants, W-2 wages, investment income etc. is below the filing threshold then there are no taxes and no reporting to be done on the parent’s return relating to student income, not that it could be done on the parent’s return anyway. Only the parents can take the AOTC on their return. I’m not very familiar with the Lifetime Learning credit, but the AOTC would be better between the two. But are there qualified expenses left for the AOTC after subtracting the tax-free scholarship/grant amount?
I am up to this question on the FAFSA as well and now I’m stuck. My D goes to school in Mississippi, we are from NY. Bottom line, all her expenses are about $35000 per year which includes her airfares which total about $2000. She receives a $5000 grant, 10,000 off for out of state tuition (both of those were from the music dept.) $3600 from a Pell grant and $1500 per year for a girl scout gold award. That totals $21000. She took a $5500 loan out and I’m covering the rest which is about $9000. Our Adjusted gross income is about 47500. Any help or comments on how to fill out that question of Grant and Scholarship aid reported to the IRS would be greatly appreciated. My daughter earned about $600 last year
You answer that question based on whether she has to include any taxable scholarships on her tax return. So that’s what you have to figure out first.
I’m getting $20,100 for the scholarships/grants. How much was the total of tuition, fees and required books and supplies(assuming you have receipts for those purchases). If the school just billed the in-state tuition, then forget about the $10k OOS grant, they cancel each other out. Room and board, airfares etc. don’t matter for this.
If your D a freshman? You only include amounts credited and paid in 2014, not for the full 2014-2015 school year. If she’s not a freshman you would be looking at spring 2014 and fall 2014 for the amounts.
ETA: You really should read chapter 1 of IRS Pub 970:
How much of the scholarships and grants were for 2014? If some of this award was for 2015 and got credited to her account after January 1, it would not count for last year, I don’t believe.
AD will clarify…but I believe you use only what was allocated and disbursed in 2014, and also only the expense part that was actually paid in 2014.