So I’ve been looking things over for the 2015 tax year and when I file a return next January.
There’s the AOTC.
I’m just curious as to how much I’d have to (over)spend to receive the maximum $1k refund.
My expenses Spring 2015 semester:
$3270.21 for Tuition/Fees.
$553.95 for Textbooks ($13 of this was supplies, the rest is for 4 books at their cheapest options).
This Fall Semester Expenses:
$3161.14 for Tuition/Fees.
The Bookstore just released their lists yesterday for this semester,
so in total my textbooks will only cost $140, since
I’m in mostly writing and English courses the majority
of the books necessary can be checked out in a library.
Altogether, for the whole TAX YEAR 2015, my educational expenses before
grants and scholarships are:
$6431.35 for the 2015 year tuition and fees.
$693.95 for the 2015 textbooks and supplies.
Total= $7125.30
Last semester was all messed up with aid because I received a grant that I wasn’t expecting, and the FAO wouldn’t let me decline it, so I was awarded $3300 during Finals Week of Spring 2015.
I’m just wondering how AOTC works and what I would have to spend this semester to receive as close to $1k of that refund as I could.
For the AOTC, you qualify based on income level and spending out of pocket (not financial aid or scholarships, 529 money, etc) for qualified expenses. The first $2000 of expenses will result in a $2000 credit. After $2k, then the next $2k will receive 25% credit so you can get up to $2500 tax credit for $4000 in qualified expenses, provided you meet the income guidelines.
That’s exactly what I’m curious about…income.
I worked this year, but none of my income from work went to school expenses.
Most of my school expenses (not tuition and fees) were paid by my student aid refund.
My student aid refund was a mix of loan and grant/scholarship money leftover once tuition and fees were paid.
What’s my 1098-T form used for? Is it the AOTC, because I believe that’s how I got awarded a small refund from it this year when I filed my 2014 tax return.
You have to subtract the amount you received for scholarships and grants from the QEE, qualified education expenses which include tuition, books, fees. If you then have QEE for which you paid, you (parents if you are a dependent) may be able to claim the AOTC. It would make no sense to ‘overspend’ on books because all you’d get back is what you spent, so there is no ‘making money’ on it. So you’ve spent $7125. How much did you receive in grants and scholarships? Don’t include loans.
So your need to “pay” at least $4000 of your education expenses. However, your 2015 expenses of $7125.30 less $3300 (awarded during finals week of Spring 2015) = $4125.30 which you need to reduce further from the Fall grants and scholarships.
Are you paying taxes on scholarships/grants above the value of tuition/fees/supplies? If so, the amount you’d overspend is higher that the reduction you’d get in taxes.
I think you are over 24 and independent for FAFSA, correct?
There are upper income limits for AOTC, I think it gets phased out at above $80k.
But it also depends if the AOTC reduces your taxable income, up to 40% or $1k is refundable if you don’t owe taxes.
So nobody can predict what your refund will be until the numbers get added at tax time.
You need to print out your spring and fall tuition bill.
Total all tuition, mandatory course fees and books (supplies like notebooks don’t count, if you are required to buy goggles or special software I think that counts) for 2015.
Then add all scholarships and grants that were applied to student account in 2015.
The difference is what you can claim for expenses for AOTC. But how much credit you receive depends on your income.
4255.00 Spring 2015 grants and scholarships ($2640 Pell and $1615 FSEOG)
4988.00 Fall 2015 grants and scholarships
= -2117.70
I was awarded $3300 the first week of May, during Finals week, but the student account
shows two disbursements of $1615. One in Fall 2014 and one in Spring 2015,
but I received it all at once. How does THAT work for tax purposes?
Will my FSEOG of $3300 be on my 1098-T or just half of it?
^ From experience, what matters is when you received the money, no matter how the financial aid package has it listed. So the entire $3330 would belong to the 2015 taxes to be filed in 2016.
My semester aid refunds are a mix of loans and grants/scholarships, so I can’t say I’m buying my textbooks with JUST loan money or JUST grants/scholarships.
I’m really wanting to grab that $503 EIC refund, as well, but I’d have to make a certain amount of money this year to receive it.
I think the cap for someone my age with no qualifying children is $14,820, but I don’t know what the sweet spot is for income to receive the full credit. Maybe 6k?
My income from WORK so far this year is only 1k.
Will I need to separate the amounts from my aid refunds and determine what’s considered income and what’s considered loans?
Is my refund money considered income or what is it considered, if it’s both loans and grants?
The thing about EIC is you have to earn a certain amount to benefit from it (thus the E in EIC for EARNED income). If you’ve only earned about $1000 this year, you won’t get much of a credit.
The good news is you probably won’t owe any taxes on the excess scholarships and grants. As an independent person filing taxes, you have a $6300 standard deduction and a $4000 personal exemption. With only $1000 in earned income and ~$2200 in excess grants, you are well under the minimum for owing any taxes.
Loans are not considered in this tax process, so you should just exclude them from the calculations. The only time to include them is when you graduate and start paying them (you get a tax break from that).
You provided a link to the IRS document about AOTC.
I thought Pell Grant ALWAYS went to tuition and fees FIRST. Mine always does.
Is that document trying to say otherwise?
Before I receive my refund, the school disburses in this order:
Pell, then any other grants/scholarships, and lastly loans.
Bear with me, and help me understand. Ha!
Spring 2015:
I was awarded Pell of 2640 and FSEOG of 3300, but I didn’t receive the $3300 until Finals Week in May.
Fall 2015:
I am going to be awarded Pell of 2888, a similar grant of $1650, and a scholarship of $450.
So in total: $10928
If my Pell each semester is automatically used for tuition and fees, then that leaves:
$3300 + 1650 similar grant + 450 scholarship= $5400.
Is this $5400 considered taxable income or not? From the document in the link below, this amount can be considered income or it can be used towards educational expenses.
^^ The amount is lower than $6300, even before itemized deductions (your educational expenses). So no, you don’t have to file, unless you have work earnings that put your total above that amount (after fees and etc. are deducted).
The terms of the Pell Grant don’t require that it be used for tuition and fees. Your school may apply it to that but you can choose to treat it as having gone toward non QEE and include it in taxable income so you can take the AOTC.
IRS Pub 970, chapter 1 has the details about taxable scholarships grants. Chapter 2 the details about the AOTC.