<p>I had a similar question last year but was unable to find the thread under my profile. I can't remember how I did this.</p>
<p>Son is going to convert to income & pay taxes on part of his scholarships in order for me to claim the AOC. I know the amount we can use is $4000, what I can't remember though is say for example on his 1098-T line 5/scholarships is 20,000 and line 2/tuition is 17,000 does he need to claim the difference (3,000) plus the extra $4000 for a total of $7,000 in scholarship income or is it just the straight $4000? The more I think about it the more confused I get! LOL Hopefully this makes sense. I'm thinking he should claim $7000 as income but don't want to pay taxes on any more then we have to.</p>
<p>It’s going to be the $7000. He owes taxes on the 3000.00 no matter what, then you need to convert the other 4K to towards taxable to get the AOC. I’m not a tax expert though or the most knowledgable poster here. </p>
<p>He has $3000 of ‘natural’ taxable scholarships and will be making an additional $4000 ‘artificially’ taxable, so yes he has $7000 of taxable scholarships. Remember that required books and supplies can be added to the billed amounts of QEE.</p>
<p>There is one new factor this year that may make doing this a little less valuable than in previous years depending on the parent(s) tax bracket. See this thread. The new part for this year starts with the February 1 post on page 2(how I miss the post numbers).</p>