Filing taxes with 1098-T, 1099-MISC, and Dependent vs Independent

Paying for College
1

<p>I've got a 1098-T that lists 6364.25 in qualified expenses, and 14817 in scholarships (basically, just the fall semester) and grants (plus 750 on a 1099-MISC that is, apparently, the wrong form) and I'm wondering what the best way to file my taxes to minimize what I have to pay. My parents 1040 has a negative amount AGI, so I was wondering if there was a way for them to claim some of my R/B expenses to get AOC or something. </p>

<p>Of the 14817 in scholarships, there's 6000 Cal Grant, 2500 Pell Grant, 2500 scholarship, and the rest is assorted school grants/scholarships. None of them are restricted to a tuition/expenses only, but I don't know which ones went towards what parts because they were all processed directly by my school's financial aid office. </p>

<p>Also, if I do have to claim all of my scholarship as my own income on my own 1040, it seems to me like it would make more sense to set myself up so I could not be claimed as a dependent, increasing my exemptions to 9500, where it would be able to cover all of my scholarship non-qualified expenses income. </p>

<p>Help is appreciated, thanks.</p>

2

<p>This is a case where you do have to run the numbers every way possible. Don’t forget to run the state taxes as well. That way you and your parents can determine which of the possibilities is most advantageous overall for the whole family. In other words you may find out that if you are a dependent you would pay more in federal and state taxes, but your parents would save even more than that in their taxes. If they can use that money for your education, everybody wins.</p>

3

<p>While you are at it, run both sets of results through the FAFSA formula. It is possible that the best way for taxes is the wrong way for FAFSA if you would lose a substantial Pell Grant.</p>

4

<p>Unless your earned income exceeds one-half of your support, you cannot claim the refundable portion of the AOC credit. </p>

<p>[Publication</a> 970 (2011), Tax Benefits for Education](<a href=“Publication 970 (2022), Tax Benefits for Education | Internal Revenue Service”>Publication 970 (2022), Tax Benefits for Education | Internal Revenue Service)</p>

<p>Refundable Part of Credit</p>

<p>Forty percent of the American opportunity credit is refundable for most taxpayers. However, if you were under age 24 at the end of 2011 and the conditions listed below apply to you, you cannot claim any part of the American opportunity credit as a refundable credit on your tax return. Instead, your allowed credit (figured on Form 8863, Part IV) will be used to reduce your tax as a nonrefundable credit only.</p>

<p>You do not qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you.</p>

<p>You were:</p>

<p>Under age 18 at the end of 2011, or</p>

<p>Age 18 at the end of 2011 and your earned income (defined below) was less than one-half of your support (defined below), or</p>

<p>Over age 18 and under age 24 at the end of 2011 and a full-time student (defined below) and your earned income (defined below) was less than one-half of your support (defined below).</p>

<p>At least one of your parents was alive at the end of 2011.</p>

<p>You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2011.</p>

<p>Earned income. Examples of earned income include wages, salaries, tips, and other taxable employee pay; net earnings from self-employment; and gross income received as a statutory employee. Statutory employees include full-time life insurance agents, certain agent or commission drivers and traveling salespersons, and certain homeworkers.
Support. Your support includes all amounts spent to provide you with food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. To figure your support, count support provided by you, your parents, and others. However, a scholarship received by you is not considered support if you are a full-time student. See Publication 501 for details.
Full-time student. You are a full-time student for 2011 if during any part of any 5 calendar months during the year you were enrolled as a full-time student at an eligible educational institution (defined earlier), or took a full-time, on-farm training course given by such an institution or by a state, county, or local government agency.
Claiming the Credit</p>

<p>You claim the American opportunity credit by completing Parts I, III, and IV of Form 8863 and submitting it with your Form 1040 or 1040A. Enter the nonrefundable part of the credit on Form 1040, line 49, or on Form 1040A, line 31. Enter the refundable part of the credit on Form 1040, line 66, or on Form 1040A, line 40. A filled-in Form 8863 is shown at the end of this chapter.</p>

5

<p>Taxable scholarships (scholarship money in excess of tuition and/or scholarship money used for tuition that you choose to pay tax on so that you can claim the AOC on those dollars) are subtracted back out of AGI for purposes of determining EFC. The EFC determines the amount of the PELL grant.</p>

6

<p>You are most likely a dependent (see Madison85’s post). As such, you cannot legally claim yourself on your tax return even if your parents choose not to, and you are not eligible to claim AOC. You parents should be claiming you on their taxes. Because your eligible expenses are less than your scholarships (tuition, fees and required books - not room & board), you don’t have qualifying expenses, so who would claim AOC is moot. </p>

<p>That $750 on a 1099 may be money that was made available to you to cover incidental expenses. If so, it is reported on the 1099 because it is not employee compensation (which would come on a W2), but it is income.</p>

7

<p>I believe that the student can choose to pay tax on some of the scholarship money used to pay tuition so that the parents can get the some AOC.</p>