<p>Hi, hopefully quick question. We, like most, will file taxes and have not yet determined which credits we will apply for. D has scholarships and grants (no 1098 yet), and she will file taxes too. For FAFSA purposes, initially can I leave her scholarship/grant amounts off and the IRS retrieval tool will pick it up later? Or, do I include those as part of her AGI?</p>
<p>Its also interesting, I can't fill in certain fields this year - FAFSA asks different questions that skip net worth/asset questions, I assume that is correct. </p>
<p>Remember, you only include the taxable part of scholarships and grants as income to her. Check if her school has the 1098 available online. My daughter’s school never sent a paper 1098 - it was online. We did not always find the 1098 to be completely accurate. And it did not include certain expenses that can be used to calculate how much of the scholarships were taxable (such as required books).</p>
<p>You should enter the data properly in FAFSA. Even if the IRS retrieval tool picks it up correctly, you need to have correctly answered the FAFSA question about how much taxable scholarship/grant money is included in the AGI. This is used to reduce the AGI so the scholarship/grant money does not increase her EFC. Using the IRS retrieval tool will not answer that question for you.</p>
<p>Yes, FAFSA often skips certain questions in response to data you have entered.</p>
<p>The school may not provide a 1098T if scholarships/grants exceeded qualified education expenses. They aren’t required to provide one under that circumstance. You would need to use bills/online accounts to determine the taxable amount, though you should still do that to verify the amounts on the 1098T if you get one.</p>
<p>Thanks - her QEE (tuition, books, fees) for fall term (and I think I can use amounts paid for first 3 months of 2014 from reading the 970 pub) - exceed her scholarship and grant amounts. So, if that is the case are any taxable? </p>
<p>You can use amounts actually paid in 2013 that are for a term that starts in the 1st 3 months of 2014. If you actually pay in January or later you can’t use the amounts for 2013 taxes.</p>
<p>If QEE is greater than scholarships/grants then there would be no taxable amount.</p>
<p>If the scholarships/grants were all used to pay QEEs (not room and board), then they are not taxable.</p>
<p>You mentioned you may take some education credits? Don’t forget that you can not “double dip” - that is you can’t use the same expenses to make a grant/scholarship non taxable and also use it to claim an education tax credit.</p>
<p>By the way, the American Opportunity tax credit is by far the best one currently available.</p>
<p>Thanks again! So, for FAFSA purposes, I don’t believe I need to report her scholarships/grants as part of her AGI. Correct? I don’t think her school has 1098 online (at least for parents), have a call into their financial aid office. </p>
<p>And, I don’t know yet how our taxes will be filed so thought I wouldn’t choose either the AOC or the QEE (if applicable). The only portion that we (as parents) may have that would be eligible are the remaining QEE that her scholarship/grants didn’t cover. </p>
<p>And, I thought FAFSA this year would be easier! grimace… I think this will not get done today…</p>
<p>If that amount is less than $4000, the amount needed for max AOC, you can, if the terms of the scholarships/grants don’t say they have to go toward QEE items, allocate part of them toward R&B. Your daughter would then have a taxable amount, file taxes if total income required her to, perhaps pay a small amount of tax if total income is over the dependent standard deduction of $6100. Then you would have more QEE to claim the AOC. See the examples in the AOC chapter of Pub 970. The additional AOC should be more valuable to you than the amount of tax your daughter may owe.</p>
<p>Parents generally don’t have access to the 1098T. Generally the school emails the student when the 1098T is available online with instructions how to access/download it. She should then forward it to you.</p>
<p>^^Yes, we have done that in the past. Part of my daughter’s scholarship was a tuition waiver, so could not do it with that. Part was a cash scholarship so we allocated that to room and board, made it taxable to her (we paid the taxes for her of course), and claimed the AOC.</p>
<p>In most cases, the AOC would be better. The tuition and fees deduction reduces your taxable income by up to $4,000. The AOC reduces your actual taxes by up to $2500.</p>
<p>Been dwelling on this a bit more and have another question. If we don’t know which we will claim on taxes - AOC or tuition/fees deduction - can I put one response on FAFSA and the IRS retrieval tool will correctly populate it if it changes when we submit our taxes? I realize it impacts early EFC results, but am waiting on a response from our accountant. And, yes, this is the amount left on tuition/fees/books that her scholarships/grants didn’t cover. We do have income that I believe will be classified as unearned this year, so am thinking the deduction may be more beneficial.</p>
No, that’s not what I meant to say (Though I see I worded that rather badly). She had 2 scholarships, a tuition waiver and a cash scholarship. The tuition waiver, of course, had to be allocated to tuition so was not taxable. The cash scholarship was not specifically for any purpose so, rather than allocate it to remaining tuition and fees, we treated that as being used to pay for room and board. That made that taxable income. We then claimed the AOC for tuition and fees that were paid with other funds.</p>
<p>I don’t see how having some unearned income changes a credit directly reducing tax owed being more valuable than a deduction that only reduces taxable income. Unearned vs. earned income doesn’t affect the MAGI limits for qualifying for the AOC.</p>