<p>HI,
We want to use scholarship money to 'pay' for room and board and personal money to 'pay' for tuition so that we can receive tax credit.</p>
<p>But, my question is this: moving scholarship money from the 'qualified' to the 'non-qualified' category means we will have to pay taxes on it. But who has to pay? My son, (who could claim it on his taxes and still not have to file a tax return because he has so little extra earned income) or will I have to claim it because he is my dependent?</p>
<p>When calculating the AO credit and the taxable portion of scholarship money, you subtract the scholarships from the required tuition and books. If you have scholarship money left over from tuition and fees it is taxable. However, you don’t have to pay tuition from the scholarship versus the student loan versus the parent contribution. What matters is that all scholarship funds that are in excess of tuition, fees and books are taxable, and any tuition fees and book fees in excess of the scholarship are eligible for teh American Opportunity credit.</p>