<p>Is it possible to get an education tax credit if you have scholarships that exceed tuition on a 1098t? </p>
<p>For example, is it possible to get a education tax credit if a student has a full ride, (you did not pay anything), other than the tax owed on the room and board portion of the scholarship?</p>
<p>According to my understanding from hours of reading and reading IRS 970 - and I am not a tax accountant so this is just my opinion:</p>
<p>If it was a completely full ride with all grants and no loans or WS, then no you cannot claim a tax credit.</p>
<p>If there were loans or WS involved, then yes you may be able to claim a tax credit. In this circumstance, if the scholarships do not specify that they were to be used for tuition and fees (for instance my daughter has a full tuition waiver so that cannot be used for anything but tuition), you can elect to have paid some tuition and fees with the loans and paid the room and board with parts of the scholarship. That would make more of the scholarship taxable (whatever was used for room and board) but make you eligible for the tuition tax credit (if you are otherwise eligible). That is the way we have done it.</p>
<p>Remember if the student is a dependent on the parent's tax return then only the parent can claim the credit. If the student is not a dependent then only heshe can claim the credit.</p>
<p>I had this same question, glad I searched old threads. and again thank you swimcatsmom for your expertise.</p>
<p>I am using Taxact to prepare my return and I mistakenly entered my son’s 1098T on my return – he has a full ride, (tuition/room and board) so his 1098T shows more scholarship than tuition. weird, but Taxact interpreted this $ 0. qualified tuition entry as eligible for a tax credit. </p>
<p>this of course didn’t make sense as I knew so I came here for direction. reading that Turbo tax doesn’t handle certain items correctly, Taxact seems to handle incorrectly as well. Realize my son needs to enter 1098T on his return and pay tax on the taxable portion of his scholarship.</p>
<p>I deleted the 1098T from the return and it correctly took the credit off. Would expenses for books qualify my son for any credit. And still figuring this out, my daughter used her 529 distribution to pay for her qualified tuition, (direct to the college) although I did pay fees and books. Wondering if she would qualify for the AO credit? thanks again</p>
<p>I should put in a big caveat that I am not a tax expert, though I have spent a lot of time researching all this. One thing I have found is that even CPAs on various discussions I have found on the web are very confused by 1098s and disagree about how you can or can not handle scholarships and grants and about the tax credits. Some say you can decide whether the scholarships go to tuition and fees or to room and board (if they are not specifically for one or the other), others say you can not. I personally choose to follow the opinions of the ones that agree with my interpretations! IRS 970 has the following 2 examples on page 12 and 13:</p>
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<p>lindz - if the tuition is used to as a qualified education expense to make the 529 account distributions tax free then you can not use the same tuition expense for the AO tax credit. But if there are other required fees and books that are paid with other funds (loans, savings etc) then those can be used as qualified education expenses for the AO credit. The AO is much more lenient about the use of expenses for books than the Hope is.</p>
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Probably not. Because in order to get a tuition credit, he has to claim himself on his return. But you probably claim him.</p>
<p>thanks again, swimcatsmom, you are so generous with your help! I’m clear that I can’t use my daughter’s tuition expense to qualify for an AO credit since her tuition was paid out of a prepaid college plan. However she does have required fees/book so she will qualify for an AO credit. </p>
<p>I’m less clear about my son, he has no qualified tuition expenses, or required fees, but has book expenses. Can book expenses alone qualify a student for an AO credit? </p>
<p>Also was further confused about qualifying for the AO credit if your child is your dependent, I had assumed this was true but in the Taxact help area it states, see item #5;</p>
<p>American Opportunity Credit Qualifications
For 2009 the American opportunity credit is available. The Hope and the American Opportunity credits are mutually exclusive. One or the other can be in a return, but not both. The following requirements apply to the American opportunity credit.
Briefly, the qualifications for the American opportunity credit are as follows:
<p>I don’t quite understand what they are saying there. If a student is claimed as a dependent on their parent’s return then only the parent can claim the credit. If the student cannot be claimed on the parents return then only the student can claim the credit. For instance we will probably claim our daughter as a dependent so we would claim the credit for her. Our son earned too much for us to claim him as a dependent so only he can claim the credit for him.</p>
<p>There is a weird ruling for the refundable part of the credit (the $1000 part you can get even if there is no tax liability). A student under age 24 whose earned income is not <50% of their own support cannot claim the refundable credit themselves.</p>
<p>Books are qualified tuition expenses for the AO, so can be used for the AO. I think books is mostly (if not all) all we will be using for the AO for my daughter as she has a lot of scholarships and grants (haven’t crunched all the numbers yet though).</p>
<p>I agree with SCM, there’s no consensus on this and it’s very murky.</p>
<p>We spoke with a tax acct last year b/c our calendar year and school year expenses were actually not in sync and wanted to confirm our cash flow could override the 1098T. We also asked about scholarships paying room and board…and those actually become “taxable income”…not a good thing as obviously your kid increases their AGI for the following year’s FAFSA.
The liklihood of that gliche being detected by the IRS is low but if audited, yes, any scholarships in excess of tuition being attributed to room and board are in fact taxable income.</p>
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Actually it does not affect the EFC. Although taxable scholarships/grants will increase the AGI you report on FAFSA, you also report taxable scholarships included in the AGI in a separate question and the EFC formula deducts them out of the AGI before calculating the EFC.</p>
<p>Ah…that’s good news!</p>
<p>Actually it does not affect the EFC. Although taxable scholarships/grants will increase the AGI you report on FAFSA, you also report taxable scholarships included in the AGI in a separate question and the EFC formula deducts them out of the AGI before calculating the EFC.</p>
<p>Question 44d in this years FAFSA</p>
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<p>Nope. If your child paid for books and is your dependent then YOU include that amount on your tax return and you can claim the credit if you qualify.</p>
<p>swimcatsmom - the ruling about being under 24 on the refundable part is to prevent kids whose parents make over the limit in $$$ from filing as independent in order to take the credit.</p>
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<p>I have found this happens a lot. If you pay spring tuition in January then the school most likely will include it on the prior years 1098-T - when the bill was due and not actually paid.
You claim the expenses the year the bill is paid. 1098T’s are not always “correct”.</p>
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I had not thought of it from that aspect (probably as we are well below those income levels). We are well below the income cut off but do not claim our 23 year old son as a dependent on taxes as his income is too high. I think from reading the rules he can claim the refundable credit as he does provide more than 50% of his support from income from work (he had a summer internship last year that paid quite well). My daughter on the other hand is borderline with the support question as far as tax filing is concerned. She earned some money from work last year but certainly not enough to be considered half her support, but also had loans and the income and loans together could put her in the more than half her own support for filing taxes. I think she actually will be our dependent for taxes this year, but last year she was not as she earned more from a summer job in 2008 (couldn’t even find one in 2009). I personally don’t think the “more than half your own support” criteria for being claimed as a dependent for tax filing should have a different basis than the “more than half your own support” criteria for the refundable credit.</p>
<p>You may make out better with her as your dependent - they you will get the whole $2500. If she is not your dependent then she can get only $1000 if she has no tax liability. Of course as your dependent she misses the “Making work pay” credit - which I think is stupid.</p>
<p>Our taxable income (husband is retired and his SS pension is not taxable)is low enough that we will not get the full $2500. We should get the $1000 at least. It would actually be better if she could get it as it would wipe out her taxes and give her some more with the refundable credit. The making work pay really irks me, she worked just as hard for her money as someone not claimed as a dependent by parents.</p>
<p>You will get the $1000 - everyone gets that even if they have no tax liability. If you won’t get at least $1400 ($1000 + MWP credit) then do the math and see if she can claim independent.</p>
<p>I don’t think I can convince myself (or the IRS) that her income from work provides >50% of her support. Income from work plus from loans, borderline so could probably legitimately file her as our dependent or not. But for 2009 her income just from work is definitely not >50% of her support. That’s why I don’t like the rule.</p>
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Right. But the question was, if the student has taxable income from scholarships, can she use the books to get a tuition credit. The answer is no because the PARENT is claiming the child and therefore, the child cannot get a credit.</p>
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No she won’t, because she is under 24 and doesn’t provide more than half of her own support so she doesn’t get the $1000.</p>