I have been pulling out my hair. Any help you can give me I would be so thankful. My child is a freshman. He got his 1098-T- He has $4377 in Box 1 ($3584 tuition and $793 mandatory qualified fees)and $7050 in Box 5 (scholarships). He also had $391 in mandatory books.
He also received a 1099-Q for $3584 (prepaid tuition DISTRIBUTION from state contract) with earnings of $1884.13 and 1699.37. His Prepaid Tuition MUST go towards tuition and cant go to room and board per our Prepaid Contract. Making almost all of his room and board TAXABLE. Room and board expenses are 6335 and 5886 is TAXABLE for room and board.
Does 1099-Q go on his taxes if in his name and the 1098-T reported on ours? Just very confused.
Turbotax and Taxact are both saying we get almost the full AOTC. Is this correct? Thanks so much!
I’m not an expert in this specific circumstance but the AOTC only applies to tuition/fees and mandatory books not covered by scholarships.
If he’s a dependent, the 1098-T goes on yours.
The way I read your post, I don’t see how he qualifies for nearly full AOTC if the scholarship more than covers his tuitions/fees/books.
We’re in a similar situation because our daughter’s tuition/fees are almost entirely covered by a scholarship, so we’re only able to use mandatory books and a couple small fees as a qualifying AOTC expense.
I understand less about the second part of the question. But for you to get the AOTC, he has to have qualified expenses not covered by scholarships — and room and board are not qualified expenses.
The 1099-Q and 1098-T don’t “go on” anyone’s tax return. Information from a 1099-Q can be used in figuring the taxable portion of any non-qualified distribution, and the tax return this income would be reported on depends on to whom the distribution was made payable. Information from a 1098-T can be used to help figure out if any scholarship money is taxable, and this would be reported on the student’s tax return. It can also be used to claim an education tax credit, and whether this is reported on the student’s return or a parent’s return depends on a number of different factors.
If your son had $4,768 in AOTC qualified expenses in 2018, but $3,584 was paid from a “prepaid contract” and the balance was possibly paid through a tax-free scholarship, there’s no way you will get “almost the full AOTC.”
But, there are lots of details that you have left out, so it’s impossible to say whether or not the tax programs are correct.
Your son pays the tax on any taxable scholarships. He will get $12000 as a standard deducion so it might be best for him to claim all of it as taxable and then you (on your tax return) can take the AOTC. Anything used for room and board does not count toward the AOTC
Turbotax is saying we get the credit, when I dont think we should either. Have spent like 20 plus hours on this! Ridiculous and we are very knowledgeable but when turbotax cant handle it, even after talking to enrolled agents a lot, I am so fed up.
I’m also using TurboTax … when I enter my daughter’s tuition/fees, and then state the value of her scholarships (in another field), it correctly shows that only a small amount of her uncovered bills/mandatory books can be applied to the get the AOTC.
If you plan to finish filing with TurboTax, I’d be inclined to pay the extra fee to have a TurboTax adviser talk you through why it’s stating that you get the nearly full AOTC when you don’t have qualified expenses for him in excess of scholarship amount.
I’m limiting my comments to your taxes since you stated your child is a dependent. (Although he’ll have to file too, of course)
TurboTax interview should cover it all. There is a worksheet for AOTC somewhere too.
Add up all QEE (tuition fees books) on a piece of paper.
Then subtract prepaid tuition plan since it has to be used for tuition.
Is there anything left? That is adjusted QEE. AQEE
That you can claim towards AOTC.
All other scholarships can be declared for non QEE and made taxable, if the scholarship allows that.
I think TurboTax also asks about prepaid tuition plans and such.
Try entering the 1098T and then declare all scholarships received to be paying for room and board (as part of entering 1098T info).
If he had $4377 in tuition fees and $391 for books (it asks that in TT), then he would have $4768 in QEE.
Subtract the prepaid tuition from that and that will be $1,184. That is adjusted QEE.
And you should be able to claim that for AOTC.
Then your son will claim all other s scholarships on his tax return as taxable.
Not a tax professional, just a mom doing our own taxes.
Your situation is like ours since tuition is covered by the prepaid plan and has to be used for that. My D got a scholarship for tuition. So we only ever used to claim books and fees for AOTC and she would claim other grant and scholarship as taxable income on her taxes.
Ugh I only have 2 more tax seasons to mess with this stuff. Every year I dread it! I sit at my dining room table with papers spread out galore, trying to make sure I do the same way as I did in years before. Mommdc explains it so simply, but why it never seems to work out like that when you’re doing it, I don’t know.
I’m getting mentally prepared to get taxes done this weekend. Hoping 3rd times the charm with all this and it will be smooth sailing.
I hope it’s ok to piggyback on this thread with a similar but slightly different scenario. For this year (2018 – son’s freshman Spring/sophomore Fall) I rounded numbers but it’s basically:
Tuition/Fees/Books: $50,000
QTP that must be used for tuition: $13,000
Scholarships/grants: $47,000
Room and Board: $8,000
Is this correct?
$10,000 of scholarships/grants is taxable and will go on the student’s tax return as additional income. He had $2000 refunded to him after R&B paid, but this would be part of the $10,000 ?
Can I/should I also allocate an additional $4000 of the scholarship money as taxable and use that for us to take the AOTC on our tax form?
This would put $14,000 additional income on his tax form.
He earned $5,500 in wages last year
Thank you for any help. I’ve puzzled over this reading and re-reading last year and this year. I think I may need to re-visit last year after I get this year settled, but it may have just been I didn’t take the AOTC when I could have by making some of the scholarship taxable to get the credit. But with different tax rates / only one semester it may not have worked.
There’s a lot to unpack here. If he had $58k in expenses ($50k tuition/fees/books + $8k room and board) and $47k in scholarships/grants to pay for those expenses, why did you take $13k from a 529 when all you needed to pay the balance was $11k? Was the 529 a pre-paid tuition plan?
Yes, sorry. By QTP I mean a pre-paid tuition plan that we had to use that way. It’s a set amount per semester for 8 undergraduate semesters and once we started using it we had to continue using it with same child. It’s a private university but they use the average of public tuition to figure the set amount each year.
You might need to see how much kiddie tax would result from having $14,000 in taxable scholarship income plus $5,500 in work income. $19,500 in total income minus $12,000 standard deduction would result in $7,500 taxable income and kiddie tax of about $1,400 (7500-2550)x24% plus 255 I believe.
AOTC would be $2,500 on $4,000 AQEE if you qualify income wise.
If for example you only claim $2,000 of AQEE towards AOTC, then AOTC would be $2,000 but only $12,000 of scholarship would be taxable and then kiddie tax might be almost $500 less.
It’s the same net result. It depends on whether you have the $1400 or $900 to pay the tax and what you want to do.
You can amend previous years’ taxes if it would be beneficial.
Thank you @mommdc . I appreciate your answer and reassurance. I’ll work the AOTC / taxable amount full and partially in the tax software to see what happens. We do qualify for the full amount income wise.