<p>I'm trying to figure out our taxes so if anyone here could help me, I'd really appreciate it. Son is a freshman so these are just the figures for the first semester and this is all new to us. </p>
<p>Son's grant is larger than the tuition and fees reported on the 1098T plus he received outside scholarships of $1700 making his total income $30,856. (1098T says: grant=$29,156 / tuition $23,423+orientation fee $416=$23,839.) Once I subtract the tuition, orientation fee and books of $245, he is left with income of $6772 so he has to file and pay almost $700 in taxes BUT there were other fees not listed on the 1098T that might "save" him from paying so this is my main question. Fees excluded from the 1098T include Transcript Fee of $105, Student Life Fee of $717 and Health Service Fee of $429 (different from health insurance.) </p>
<p>***Can I deduct these fees of $1251 from the income part of his grant for income tax purposes when doing the worksheet 1-1? If I am able to subtract the above extra fees, he would be left with income of $5,521 and then he wouldn't have to file and pay taxes, is that correct? Even if I could only subtract the student life and transcript fees because the health fee seems "iffy", it would lower the income to $5,950 so he wouldn't have to file because he would have to have $6,100, right? What will happen if the 1098T doesn't list these fees and we don't "match" up with him not having to file? </p>
<p>When trying to do the worksheet 1-1 on Taxable Scholarship Income it says "Tuition and fees required to enroll at or attend an eligible educational institution" which they are. He could not waive these fees and they are mandatory for all students "a condition of enrollment and attendance." Why his school left these fees off the 1098T is a mystery to me and makes this SO much more difficult. I searched for hours and found many colleges include these same fees on their 1098T but son's college did not for some reason. I did find an older breakdown of what is included in the student life fee and it includes charges such as printing fees, career services, technology, etc..so that sure seems like it's a QEE to me for the worksheet 1-1. Every incoming freshman must pay the transcript fee, too. Someone here mentioned that it's even possible to deduct the health insurance fee of $892 that the school charged because our own insurance wouldn't cover our son so it was also mandatory but medical insurance is not included, right? And that's also why the health fee is "iffy"?</p>
<p>We don't have money to pay an accountant to help us which is why DS got such a big grant in the first place. It seems like getting the extra outside scholarships was a mistake because they took away his work study and now he might have to pay taxes, too, if I can't figure out how to do this properly. Thank you so much if you are able to help! me. </p>
<p>Thank you 4kidsdad! Taking away the transcript and student life fees means his income is now $5950 and he doesn’t have to file a return at all, right? So that part of my problem is SOLVED. Yippie!</p>
<p>Can I also ask you about the AOC? I am having trouble with this worksheet, too, because again, I don’t know how to figure out the QEE and don’t even know if we paid enough to take a credit. We paid $2815 directly to the school using the $1700 scholarship money for part of it. There were no conditions on the scholarships saying tuition only. On the 1098T, it says I paid $2885 because it looks like they added $50 I paid on his account for laundry so that’s a mistake and I guess I have to use my figure, not theirs. </p>
<p>Are we able to claim the AOC on our taxes even though we only paid this small amount to the school? I tried doing our taxes without it, claiming our son as a dependent, and we are due a refund of $12 so we will only get a small additional refund because we don’t owe a lot and there is some rule that you can only get 40% refunded?</p>
<p>I’m also worried that taking the AOC (if possible) means our EFC will go up because we will pay less taxes? </p>
<p>Thanks again. I should have asked here sooner instead of worrying for days.</p>
<p>It seems the school made a legal decision on those fees not to include them. They probably have more resources available to make that determination than we do. You could email the business office and ask why the school decided not to include them. But I agree that they do sound like QEE to me except for the student health fee. At the bottom of page 14 of pub 970 it says among expenses that are not QEE are Student Health fees.</p>
<p>The problem is that is in the AOC chapter. The purpose of the 1098T is to make people aware they may be able to take the AOC. Chapter 1 doesn’t speak to student health fees specifically but I would be hesitant to use them.</p>
<p>If this is his only income and it’s $6700, he should not owe $700 in taxes unless you are including state income tax. He should owe 10% of $600 after subtracting the $6100 standard deduction.</p>
Assuming you declare the $1700 as tax-free scholarship, you were paying $1115 (2815-1700) out of pocket. If correct, your AOTC would be $1115 & refundable portion will be $446 (40% of 1115)</p>
<p>4kidsdad, I believe you are correct, the OP is limited to what she actually paid out of pocket. But in order to have that $1115 count for QEE for the AOC, would she not have to reduce the QEE that off-sets the scholarships/grants by $1115, meaning the son would have to report an additional $1115 as taxable?</p>
<p>On fafsa there is a question that asks for the amount of education credits the parent claimed on taxes. You should only enter the non-refundable part of the credit and that amount will not be held against you as far as taxes you paid. I don’t know if profile asks for that amount or how schools would use it.</p>
<p>Okay, I called the school and asked about the fees and of course, it doesn’t make sense. They said because the transcript fee is only required of freshman they don’t count it and add it to the 1098T. Then I asked about the student activity fee and the lady didn’t know but said they “follow the IRS regulations” so ugh, I still don’t know but it sounded like I can’t use those fees to offset the income. </p>
<p>Annoyingdad, we claimed son as a dependent so he can’t take the deduction. Between your answer and 4kidsdad, I am beginning to see that these are perhaps the different ways people figure out the taxes to see which way has us pay less money.</p>
<p>If I don’t claim son as a dependant, we will owe $585 in extra taxes. If I do claim him, then son has to pay the tax, he will owe $678. So the best thing to do is claim him? and have him pay the $678 and take the credit as described above of “Assuming you declare the $1700 as tax-free scholarship, you were paying $1115 (2815-1700) out of pocket. If correct, your AOTC would be $1115 & refundable portion will be $446 (40% of 1115)” </p>
<p>(How do I "declare the $1700 as tax free? or does this part not apply now?)</p>
<p>If his taxable amount is $6771, he will still get the $6100 standard deduction, so will only pay tax on $671, which will be about $60, not $700.</p>
<p>You can’t use the $1700 that was a scholarship for the AOC if it was tax free, or if you used it for room/ board. If you paid tuition with it, then your son may have more taxable scholarship money (more than $6771).</p>
<p>I think if the health fee is required, then it is QEE.</p>
<p>A dependent doesn’t get the exemption of $3900 but still gets the standard deduction of $6100. Are you doing taxes manually or using software? The software should do this part right.</p>
<p>Yes, I understand annoyingdad. So what I have to now figure out is which costs us less money. </p>
<p>1)Claiming him as a dependent on our taxes and taking the exemption of $3900 plus whatever AOC credit we can get with having him claim the full $6772 and pay the tax the tax of $678. </p>
<p>OR 2)drop him as the dependent from our taxes, give up the AOC credit and have him take his standard deduction. </p>
<p>It has to be better to keep him on our taxes, have him file a return and pay and we get a small AOC credit, right? </p>
<p>Either way it’s gonna cost us something, drat! Forgive me if I sound ungrateful but the fact is it’s hard to even pay our EFC and yesterday some woman drove off a cliff above the parking lot and landed on OUR car so we needed a break-lol!</p>
<p>I don’t know why this isn’t getting through but it should not be $678 in federal taxes. On line 5 of his 1040EZ you should be able to enter $6100 if you look at the worksheet on the back as line 5 says to do. But for you to take the AOC on $1115 of expenses, you have to add $1115 to his taxable scholarships/grants on line 1.</p>
<p>But yes, it’s almost certain keeping him as a dependent, claiming the AOC for the parents and adding $1115 to his taxable income will be the best for you. </p>
<p>In fact, if you qualify to claim him but choose not to claim him, he still has to mark the dependent box on the 1040EZ and can’t take his exemption:</p>
<p>You are not looking at HIS income correctly. Does he have any income outside whatever scholarship amount is taxable? If not, and his only income is whatever he has to pay as taxable on the scholarship, the first $6100 is excluded and he only pays tax, at 10%, on the difference. yes, you claim him as a dependent and get the extra $3900, plus the AOC. Add up all your QEEs. Now add up all expenses (room and board, laundry, travel) that aren’t QEEs. Add up all scholarship money. Figure out the best balance for you to get the max AOC (if you’ve paid at least $4000 oop) and he pays tax on the rest. Yes, it is better for him to pay tax on the R&B at a 10% rate than for you to give up the personal exemption and AOC. </p>
<p>If the QEEs are 25k, take away $4k (‘paid’ for AOC) and that leaves you $21k. ‘Apply’ $21k from the scholarships ($30k?), leaving you with $9k in taxable (to son) scholarships. Taxable scholarship income of $9k, less standard deduction of $6100 = $2900 of taxable income. $290 in tax, plus you get a $4000 credit and a $3900 exemption. </p>
<p>Sorry annoyingdad! I see what you are saying now. So I dropped trying to take those other fees and went to fill out son’s tax form. It’s odd that I have to add $350 in on the worksheet on the back but now I understand what you were trying to tell me. I’m doing it all by hand and low and behold, even with claiming him as a dependent, he only has to pay $66. Can that be right? I put in the $6772 figure as income from the worksheet 1-1 and I write sch next to it on line 1, is that correct? </p>
<p>So his part is done and all I have to figure out is how to do the AOC on my taxes. Can I still take any of that credit? </p>
<p>Even if you claim him as a dependent on your taxes, he can claim the standard deduction on his own taxes. Thus he will only owe about $60 in taxes, not $700.</p>
<p>In order for you to take the AOC on $1115 of QEE you need to add $1115 to line 1 of his return, so his tax owed will be more like $78. </p>
<p>The standard deduction is earned income + $350 of unearned income. Scholarships/grants are considered earned income for this purpose but the max is $6100. </p>
<p>Thanks for all of your help. I’m so thrilled to find out that son will only have to pay this little amount of tax. I should have done his tax return right away to know that there was the worksheet on the back. Forgive my stupidity! I got so bogged down in the 1098/fees/etc. that I didn’t do my due diligence in working through all of this before asking questions. </p>
<p>Okay, so I go and add the $1115 to his return as income but I don’t understand WHY I can do that because that was what we paid, not income or a scholarship amount? </p>
<p>Can you check this? worksheet 1-1. simply add $1115 to line 1. So now it says 31971 and line 6 just has the tuition, books and fees of 24084 and now line 9(taxable part) is 7887.
Tax return now says income 7887 minus the 6100 leaves 1787 and the tax owed is now $179.</p>
<p>If this is correct then his is done and now I have to fix mine…</p>
<p>So I go to the form 8863 worksheet, part III, and I don’t know what to enter for line 27 QEE? I don’t know how you come up with the credit above. Geez, this is crazy hard stuff; add this, multiply that, subtact this, skip that, YIKES.</p>
<p>Can you tell me what to write on this form because I’m going to have to explain it all to my DH who is even worse than me at this?
Thank you again so much! </p>
<p>You have to make $1115 of QEE available in order to say you paid $1115 of QEE for the AOC.</p>
<p>In terms of worksheet 1-1, leave line 1 as it was. You already had the $1700 outside scholarships included in there, correct? On line 6, subtract $1115 from QEE. Now you have it available for the AOC. Line 9 will be the same whether you add $1115 to line 1 or subtract it from line 6, but the logic is clear by subtracting it from line 6. You have freed up $1115 of QEE for the AOC.</p>
<p>Oops, I miscalculated when I figured what his new tax would be. Still, when you do your return you will benefit more than his $113 increase.</p>
<p>I’ll look at form 8863. My software does that automatically so that should help me figure it out. There is free software on the net that should handle this sort of thing for you, but you still need to know how to answer the Q&As.</p>
<p>Yes, sorry I did it wrong. I will change line 1 back and yes, I did already include the $1700 in it. I subtract the 1115 from line 6 instead so that’s fixed and it does make it easier to understand somewhat. I’m taking away expenses that were previously paid by scholarship so that I can now say that I paid them and get the AOC. Thanks so much! Fixing and reprinting this. I will eventually enter this in some tax software program but thankfully I will have all the mistakes worked out first because of YOUR help. Thanks! What software do you have?</p>
<p>Also, if we live in California and he goes to school in NY, will he have to do a NY and/or CA state tax return as well? </p>
<p>Ugh, DH just got home and wants me to explain why what we paid didn’t go to room and board, how do we know it went to tuition and fees and QEE? I don’t know that-lol! I should make him read this whole thread and at the very least, buy you a beer for your patience.</p>
<p>You are given the superpower by the almighty IRS per pub 970, chapter 2 to force what you paid to go to QEE by saying $1115 of scholarships/grants didn’t go to QEE and your son including that in income.</p>
<p>I’m sorry I can’t help with the state tax questions. You are going to have to check the department of revenue websites in both states to see where CA and NY consider taxable scholarship income to have been incurred and whether they consider it earned or unearned income. It’s possible you will have to file both but there should be some mechanism to offset one or the other so you don’t pay twice.</p>
<p>Still working on the 8863 but I’m going to have a brownie first.</p>