<p>Thank you moms - all of you I was reading the irs publication 970 and my interpretation of what it says is that if the scholarship or grant specifies it is to be used for tuition than that is where it goes but if it does not specify you can apply it either to qualifited expenses or to room/board. They even give an example of doing it both ways and identify the consequences. In my daughter’s case she does have some scholarship money that is to be applied to tuition but she also has grant money that does not specify so I think I am going to be okay with applying my payments to tuition so I can get the credit.</p>
<p>The same publication also states that the 1098T supplied by the college does not have to be used because it does not always identify all of the qualifying expenses so it looks like we are okay in not using that form but rather using our own information as Momof4 said.</p>
<p>I really appreciate all of your input and experience in replying to me.</p>
We have exactly the same situation with a scholarship that is part a tuition waiver, and part a “cash” designation, and that is exactly what we do.</p>
<p>I too am having issues with the 1098-T form. I graduated this past May and have been doing my own taxes since I started college. Unfortunately, I did not really know what I was doing at the time, so I just used the numbers that were given to me on my 1098-T forms. My school, like many others reports amounts billed for the spring semesters on the 1098-T form for the calendar year before the spring semester. This means that my 2010 form shows no qualified expenses billed, but still shows the scholarships and grants I received to pay for the spring 2010 semester. Consequently, my taxable scholarship income looks like $17,000 when in actuality the scholarships were used to pay my spring 2010 tuition. </p>
<p>I’m not sure how to rectify this situation because I claimed the spring 2010 qualified expenses on my 2009 tax return, since they were reported by the university on my 2009 1098-T form. The only way I can think of to prevent me from paying a sizable amount of unnecessary taxes for 2010 would be to amend all of my tax returns from the past four years. I would need to utilize my student account records rather than the 1098-T forms like I had in the past. Anyone know of a better solution?</p>
<p>You will probably have to amend what you reported in 2009. It should be worth it for you, though. Don’t assume, however, that all of your 1098-T’s back to your freshman year are “incorrect”. 2009 may have been the first year that your school included two Springs worth of scholarships on one of your 1098-T’s. My son is a junior, and 2010 was the first year to have two Spring semesters. This happened because he had a lot of credits and was able to register earlier in the calendar year than before and therefore was billed in a monthly cycle that placed his tuition bill and scholarships for Spring 2011 within the period his school uses for the 2010 1098-T.</p>
<h2>This section of the article referenced by swimcatsmom–it comes immediately after the section she cites above-- includes examples of how a larger “net family tax savings” can be achieved by claiming that parts of scholarships are better to allocate to increasing the student’s taxable income and thereby adding to what the parents can claim on their taxes as educational credits. According to the authors, “this often results in an education credit on the parents’ return that is greater than the amount of tax paid by the student”– which of course leads to a less tax/or bigger return for the student and the parents combined. The larger family tax saving begins with getting a smaller amount of the scholarship allocated to tuition, which makes more of the scholarship money subject to taxes, and by definition taxable scholarship money can lead to education credits.</h2>
<p>Example. A Form 1098-T for 2005 shows $2,000 of qualified tuition and related expenses in Box 2 and $7,300 of scholarships and grants in Box 4. None of the scholarships and grants is designated for tuition only. In addition, the student has receipts for $300 of required books, supplies, and equipment, and may be claimed as a dependent on his parents’ return. Exhibit 3 <a href=“Find Your Page | The New York State Society of CPAs”>Find Your Page | The New York State Society of CPAs; shows the completed worksheet.</p>
<p>In option 1, the student reports $5,000 as taxable scholarship income. If the student is single and has no other income, he pays no tax, because the income is less than the standard deduction ($5,000). The parent who claims the student as a dependent does not get an education credit or deduction, because none of the scholarship income is taxable.</p>
<p>A second option results in a net family tax savings. The student could deduct less than the full amount of qualified expenses and pay some tax on the scholarship. The taxable amount of scholarship would then be available for the parents to claim as a deduction for tuition and fees or for an education credit. For example, the student could deduct only $1,500, rather than $2,000, of qualified tuition and expenses on his tax return. This would leave $5,500 of taxable scholarship income on the student’s tax return and $500 of taxable income after deducting the standard deduction. The student would pay tax of about $50. The parent claiming the student as a dependent would use $500 as qualified tuition and related expenses and receive either a Hope Credit of $500, a Lifetime Learning Credit of $100, or an education deduction of $500.</p>
<p>Thanks swimcatsmom! I read the article you referenced and the appropriate part of the 970. It seems that by applying some of D’s scholarship money to room and board (scholarship does not specify), and therefore reportable on her taxes, I get a tax credit for paying tuition! It seems the figures in the 1098 T have to be changed anyway as it shows scholarships and tuition for a whole year as opposed to just the fall semester of 2010 (D is a freshman). D may have to pay taxes (that I’ll pay), but it’s worth it for the tax credit. For those who know more than me, if such changes I’m making are not right, please let me know.</p>
I was reading the irs publication 970 and my interpretation of what it says is that if the scholarship or grant specifies it is to be used for tuition than that is where it goes but if it does not specify you can apply it either to qualifited expenses or to room/board. They even give an example of doing it both ways and identify the consequences. In my daughter’s case she does have some scholarship money that is to be applied to tuition but she also has grant money that does not specify so I think I am going to be okay with applying my payments to tuition so I can get the credit.</p>