<p>Doing our taxes for 2011 and thinking ahead to next year. My son has been awarded the Presidential Scholarship and is leaning toward attending Alabama in the fall. Does the scholarship have any impact on receiving the $2,500 education tax credit (assuming you are eligible income-wise). The credit is calculated on qualifying educational expenses - room and board are not qualifying expenses - just expenses like tuition, books, etc… Since his tuition is free I am wondering the impact - i.e no credit?. Or maybe it is not an issue since the way it is billed is just a scholarship amount equivalent to the tuition - not tuition cost being billed at $0. I figure someone on this board has dealt with this issue and can respond!</p>
<p>The Presidential Scholarship pays for tuition, so you won’t be able to claim that as a qualified expense. Course fees and textbooks are qualifying expenses that you can claim. UA will send a form 1098-T every January detailing qualified expenses (not including textbooks) and how much of that amount was covered by scholarships. Note also that spring semester charges are mostly paid in December, so they will go on the previous year’s 1098-T. For example, most charges for the current Spring 2012 semester are on the student’s 2011 1098-T.</p>
<p>Sea Tide I’m not sure if that is correct or if I was given some misinformation. I was told that a credit in the amount of tuition is subtracted from your total amount due. I had asked specifically about how it wold be dealt with if D received scholarships that were marked only for tuition. I was told that it did not matter because even though the amount of tuition is deducted, it is not specifically marked as tuition.</p>
<p>Maybe I was mistaken, but it worth looking into further. Every deduction counts!</p>
<p>**buzymom3 **, you are correct in that the Presidential Scholarship is simply an amount equal to the tuition rate that is taken off the student’s bill. That is a legal loophole to allow students to use outside “tuition only” scholarships. Tax wise, it would be taxable income to the student if not used for tuition or other qualified expenses. In ILMom2012’s case, the tuition cost would not be tax deductible as it is paid for with a scholarship (assuming the son has no extra scholarships). She might be able to have her son claim $2500 in scholarship income and use the American Opportunity Credit for that $2500, which is only in existence until the 2012 tax year unless extended, for her taxes. This would likely be a lot more paperwork than just claiming course fees and textbook costs, especially if her son doesn’t need to file state and/or federal taxes.</p>
<p>What many people* do is to take the numbers from the 1098-T (qualified charges-scholarships) and add the cost of textbooks. If the number is positive, claim that for the American Opportunity Credit.</p>
<p>*I am not a lawyer or tax professional. This post is not to be considered as official tax and/or legal advice.</p>
<p>So…to get further clarification…</p>
<p>If one is not being taxed for using the Presidential for tuition, then they can’t also say that they used that money for other costs, so they still can claim the credit (as if they paid for tuition). Is that right?</p>
<p>So it sounds like the tuition scholarship will be tax-free but the $2500 engineering scholarship will be taxed (as well as any other scholarships that are not applied to tuition.)</p>
<p>Sea Tide…thank you so much for the clarification. It makes sense the way you explain it. We will have 3 in college in the Fall and I was hoping it would work to our advantage w/ the American Opportunity Credit. But I cannot complain…Presidential scholarship is nothing to sneeze at!
Have a good morning everyone-</p>
<p>Wdaveo…save book receipts…those can be applied towards that 2500. don’t know if course fees can as well since they are mandatory.</p>
<p>It looks like books, fees, supplies and equipment are tax-free if required of all students for the course.
[Publication</a> 970 (2010), 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>^^^
Good! So if a kid buys about 1000 in books/supplies (keeps receipts) and spends another 650 in fees, then that 1650 won’t be taxable.</p>
<p>Frankly, the leftover would be small and could be under the amounts to incur a tax payment unless the kid is earning a lot elsewhere.</p>