<p>My daughter had $29,201 in qualified education expenses for 2012.
She received $28,685 in unrestricted scholarships and grants.
We paid over $4,000 to her school.</p>
<p>If I show $4,000 of qualified expenses toward the AOC on my return, do I subtract the $516 difference between her qualified expenses and scholarships from the $4,000 and have her declare $3,484 as taxable scholarship income on her return?</p>
<p>Some experts will jump in here soon, but when you say $28K is unrestricted, does that mean the school did not say they would pay the tuition and the housing? Just curious because I think it affects whether you are excluded from the AOC.</p>
<p>^^^ Unrestricted meaning that the school does not stipulate that the scholarships and grants are required to be used for a specific purpose such as tuition.</p>
<p>So the scholarships did not even say something like, </p>
<p>Tuition for four years for state residents
On-campus housing stipend for four years?</p>
<p>^^^It said “XXX University scholarship.”</p>
<p>Querying - it sounds like you have done it correctly. BUT - do you also have book expenses that are not recorded on the 1098-T? Books are qualified expenses and will reduce how much is taxable. So 29,201 + books would be the qualified expenses then subtract your scholarships.</p>
<p>Not just books, but also supplies and materials specified in the course syllabus.</p>
<p>I do know (now) that books count as qualified expenses, thanks. Unfortunately, I did not know in the fall to ask my daughter for the receipts, but her book expenses for 2012 were releatively inexpensive since she mostly bought used from an older student. I have already requested the receipts for 2013!</p>
<p>I hope you are correct, but I still wonder what you could have paid above the scholarships that fit the QEE below (from Pub 970), that allows you to claim $4,000 in AOC:</p>
<p>“For purposes of the American opportunity credit, qualified
education expenses are tuition and certain related expenses
required for enrollment or attendance at an eligible
educational institution.”</p>
<p>“Related expenses. Student-activity fees are included in
qualified education expenses only if the fees must be paid
to the institution as a condition of enrollment or attendance.
However, expenses for books, supplies, and equipment
needed for a course of study are included in qualified
education expenses whether or not the materials are
purchased from the educational institution.”</p>
<p>Needingtaxhelp, presumably the OP had room and board expenses. QEE has to be reduced by non-taxable scholarships/grants for the AOC. By the student making $3484 of the scholarships taxable by saying it went to non-QEE(room and board), non-taxable scholarships/grants are reduced and there is $4000 of QEE to be claimed for the AOC, the original $516 + the $3484.</p>
<p>Needingtaxhelp – annoyingdad is correct in that my daughter had room and board expenses. Since her scholarships were not specifically for tuition (a qualifying education expense), I am choosing to apply part of them to room and board (not a QEE) in order to claim the AOC. By doing it this way, she will declare taxable scholarship income on her return.</p>
<p>We have room (above the scholarship amount) and board expenses too. I hope we can do this as well.</p>