<p>I didn't want to tag this on anyone else's question. Hypothetical numbers:</p>
<p>Say we had $30k tuition/fee charges
Received $14k grants
Paid $12k room & board</p>
<p>Can we decide that $4k of the grant is taxable (say going towards room & board?) Can we then shift this $4k of grant to son's income? If we can does he have to file a tax return even though he made less than $6100? We just missed the cutoff to deduct education credits for state taxes, (they use a ratio of expenses to magi) and are trying to figure out if this would allow us to claim it. Or will this raise some kind of red flag because our tax numbers don't match the 1098-t?</p>
<p>The grants are less than the 16k in QEE, so you have nothing taxable to him for R&B. Even if you got all $30k in grants and paid the R&B out of pocket, it’s not taxable.</p>
<p>You don’t have to shift anything because you can’t take the AOC because your income is over the limit.</p>
<p>I don’t see the need to shift anything. You have $16k of QEE and the max expenses you need to get the max allowed AOC is $4k.</p>
<p>Edit: Ok, I see what you are asking. How does having him declare $4k taxable lower your MAGI?</p>
<p>Sorry, I knew I was going to mess that up will edit if possible. We have $30k of QEE</p>
<p>Still not seeing how it lowers your MAGI? AOC is a credit after AGI is figured. Tuition and fees deduction affects AGI though.</p>
<p>I am thinking it will increase the qualified education expenses we (parents) paid, therefore bringing the expenses over the 25% of magi that MA require to take their credit. I watched the credit disappear when I added in couple of thousand dollars of income from an annuity payout.</p>
<p>Is MA MAGI based on federal AGI? It could work and you could take the AOC to boot. If your son’s total income is under $6100 he wouldn’t have to file federal. How about state?</p>
<p>Re federal only, some here in the past have reported getting letters of inquiry from the IRS concerning shifting of expenses this way but they have had the source doc, bills/bursar account statement etc. and receipts and records of payment to back up what they did and the issue went away.</p>
<p>I think you need to check into MA rules as to whether expenses ‘artificially’ increased in this way for federal purposes can be used in that ratio calculation.</p>
<p>I just ran the numbers through turbo tax, there is a savings, but with all the other things to worry about this year, it may not be worth it. We will definitely be splitting things his senior year, so it is good to know it can be done. I’ve learned so much from everyone on these boards. I know I tend to overthink things, I’ll be glad next year, when life is simple again and I can file my taxes and FAFSA on February 1st and be done with it!</p>