So, my dependent son attends a private university that generously provides grants covering 100% of expenses beyond EFC. The grant amount applies to both tax-credit-qualified and unqualified expenses. In our case, the grant totals more than the qualifying tuition and fees. So, I don’t receive a 1098T.
However, I still pay an amount to the university each semester (my EFC) that is applied to my total bill. Can I argue that the portion of my bill that I pay (and that the grant doesn’t cover) is tuition and fees (and that the grant is covering all non-qualifying expenses and only a portion of the qualifying expenses)? Or will the IRS say that the grant applies to qualifying expenses first?
I’ve read the 970 instructions in detail and they do not appear to provide an example that matches my situation. The only clue I get is that the calculation process listed (qualifying fees less grant amount) does not seem to be in my favor.