<p>I got this letter from my son's college and have not seen this posted here. This is very important. ALSO, IRS processing systems are not yet set up for this deduction and returns with this must be filed AFTER mid-February.</p>
<p>
[quote]
Dear student,</p>
<p>I am writing to share with you important information about
a tuition deduction applicable to federal income taxes
reported for 2006. The Tax Relief and Health Care Act of
2006 extended the deduction for qualified tuition and
related expenses so that taxpayers may take advantage of
it for 2006. The previous deduction ended on December 31,
2005.</p>
<p>This legislation passed in late December and retroactively
made the deduction available for 2006. This decision by
Congress occurred long after the paper Form 1040 went to
press, so the form does not includes directions as to how
to take advantage of the deduction nor does the form
contain a line item for the tuition deduction.</p>
<p>Please review this information if you file your own tax
return or forward it to parents or guardians who may be
eligible for the tuition deduction.</p>
<p>[This information is not intended as legal or tax advice.<br>
Please consult with your personal tax advisor to determine
your eligibility for any deduction or credit.]
[/quote]
</p>
<p>Please forgive me if this is posted elsewhere.</p>
<p>I presume tax software is automatically updated to take care of such issues. That's why I haven't filed yet: my brand of tax software has to update the week after next to take into account something my state legislature just did along the same lines.</p>
<p>Actually the lifetime learning credit is a maximum of $2,000 per RETURN not student. The credit is 20% of expenses up to the $2,000 limit. The Hope credit is $1,650 maximum/ student for the first two years based on a credit for the first $1,100 of tuition then 50% of the next $1,000 for a total of $1,650/ student. Be careful if you have more than one child (and/or adults) in school.</p>
<p>How does the 1098-T fit into all of this? Is that a reportable form? If we will not benefit from any education deductions, must we file the 1098-T?</p>
<p>The 1098T is not a form you file. It is a reporting statement same as a 1099, or a W-2. It is sent by the school to tell you the amount of qualified tuition you had during the year. It can be used to determine whether you qualify for a tuition deduction, or education credits. It must be taken on the return of the person who claims the student.</p>
<p>Turbo tax (among others, I'm sure) does a wonderful job of calculating which would benefit you the most. Sometimes the tuition deduction is more beneficial than the credits because it flows through to the state return. It is certainly not a calculation I'd welcome doing by hand.</p>
<p>3bm103. I do use Turbo Tax. Love it! This is our first year with the Education deductions (freshman). Our son was fortunate enough to win several merit aid scholarships that have covered virtually all college expenses to date. I am guessing if we didn't pay anything for his college expenses, then we can't take advantage of any deductions, right? Is there any need to even fill out that portion of the Turbo Tax?</p>
<p>Virtually? The 1098 T will list qualified tuition, and then in a separate box, any scholarships earned. If the tuition is higher than the scholarships, then you can take the remainder as a deduction or a credit, depending on your income. It may be only a few dollars, but every cent helps. Especially in his freshman year since it covers 100% of the fist $1100.</p>
<p>Lukester, actually you may have a different problem -- taxable income from scholarships. The part of the scholarship that goes to pay tuition and other charges directly related to enrollment and the classes take is not-taxable, but the part that goes to living expenses is. In other words, if your kid's college costs $25K for tuition and $10K for room and board, and he has a $30K scholarship, then $5K of that is taxable income.</p>
<p>But this is an oversimplification -- I'm sure there are tax worksheets you can use that make it all much more complicated. And I think the income would be reported on the kid's return, not the parent's.</p>
<p>This gets complex. Sometimes it is better to claim some of the scholarship as taxable even if excludable. Talk to a tax professional if this might apply. Turbo and other tax programs cannot deal with this type of situation.</p>
<p>I hate having to go to a tax expert to file my taxes, but I might have to this year. You are right Calmom, we will have to pay taxes on the taxable portion of our son's scholarships. I am not complaining too loudly as it is a good problem to have. Literally, we wrote one check in the fall for a $90 book and that's it! We are fortunate. Does anyone know how we document income for the taxable portion of a scholarship in Turbo Tax? Would it be better to document this on our son's taxes? That's why I was asking the earlier question about how one documents the 1098-T. Is the 1098-T how you document the addition of taxable income from scholarships? Anyone want to chime in on that question? On top of that, today we received a 1099-Q from our State's Pre-Paid Tuition program for the refund of his 529 plan. I don't know how to handle that one either. This year's taxes are going to be fun to file . . . NOT!</p>
<p>Okay, here's my question: As I understand it, I should report my graduate fellowship as income on my 1040 (because it's a living stipend, not a tuition stipend) and write "SCH" on the line next to it. But I had other jobs last year which have income reported on W-2s. </p>
<p>Is there any separate form I should file to show my fellowship income, or do I just trust that the good people at the IRS will understand that part of the income on that line is my fellowship and part is from the W-2s?</p>
<p>Three answers: (1)If you electronicly file your return total W-2's and SCH on line 7 and keep the records in case they don't get it, (2) if you file a paper copy report the W-2 and SCH total on line 7 and include copies of the W-2's with your return and (3) the W-2's on line 7 and the fellowship income can be listed on line 21 : other income as long as you identify the source and the type ( ie. SCH).</p>
<p>The IRS receives copies of all these documents from the source so they should be able to figure it out. IRS doesn't make erors.... I mean errors. :-)</p>
<p>HELP! We just got the tax form from the college showing scholarships given(big money) and tuition paid ($260 only) - DD did a study abroad program, we paid the money directly to IES - not to the college. Am I allowed to claim the money paid to IES as college expenses???? DD received College credit for the classes she took through IES and also through enrollment at the Chilean University. Yikes! Does anyone know????</p>