<p>I'm finishing up my tax returns and am confused on how to fill in the information for my son's 1098-T.</p>
<p>The total fees at vandy are approx $30,000/semester. Son received a grant for $22,000/semester and an additional $4,000 in scholarships, leaving approx $4,000/semester in various fees for us to cover. Really only about $2,000 in fees went to the Univ- rest was things like books, transportation, etc.</p>
<p>The 1098-T only reports the $23000 in tuition "received," and lists the $26,000 in grants. Apparently TurboTax is interpretting this as us receiving extra money and is simply deducting $3000 from our tax return. Is this correct? That $3000 "extra" was automatically paid to Vandy for a number of fees (first year fees, matriculation, engineering fees, room/board, etc) and we still had more to pay after.</p>
<p>Yes, the $3000 is considered income but it would be added to your son’s income, not yours. Books can be deducted from the amount but room/board and other fees (unless required for enrollment) are not deductible. What you need to determine for education credits on your return is how much of the tuition and grants were actually billed and paid in 2011. Most schools list the amount that was billed on the 1098 but you may need to check the student invoices to see if all $26,000 was paid in 2011 or not.</p>
<p>You might want to read the following publication.</p>
I’m not quite understanding what you are saying about how turbo tax is handling the information on your return. You say TT is interpreting it as you receiving extra money, but then you say it is *deducting *$3000 from your return.</p>
<p>Any grants or scholarships used to pay for anything other than qualified educational expenses are taxable income, but taxable to your son, not to you. For instance, any part of the grant used for room and board is taxable income (to the student). Is that what you are asking?</p>
<p>My daughter has had some good grants and scholarships. She (we, as we pay it for her) gets hit every year with about $1000 in taxes on the taxable parts of her grants/scholarships. </p>
<p>IRS publication 970 has all the details about education related taxes and benefits.</p>
<p>I said “deducting” because the federal return counter in TurboTax dropped by $2000 when I entered the information; sorry for being unclear or using incorrect terminology!</p>
<p>It makes sense that the extra, which technically did go towards room&board, counts as taxable income. I looked into the records and the creddited grant/scholarship is accurate.</p>
<p>Does that number sound accurate still? An excess of $3500 going to room and board reduced our refund by $2000?</p>
<p>It shouldn’t reduce your refund at all. It is taxable income to the student, not to you. This is a obviously a good thing as any taxable scholarship on his return will be taxed at a rate a much lower than yours.</p>
<p>The other thing I am thinking is that perhaps TT had been calculating an education tax credit based on the tuition you reported, but once you put the grants in, the credit went away. (the American Opportunity tax credit is up to $2,500 - it is for up to $4000 of qualified education credits, 100% of the first $2000 and 25% of the next $2,000).</p>
<p>The AOC is per student, so you can receive the full $2500 for each child (if you have eligible expenses of course).</p>
<p>Why don’t you go back in and pull out the scholarship information, then go through the return and see where the difference is happening? it should be easy to figure out where the difference lies. (That’s what I do when I do “what if” scenarios with my taxes. )</p>
<p>Vandymom, several people have pointed out but you haven’t acknowledged it, that the information from the 1098T and any taxable scholarship income is reported on your son’s tax return, not on the parents. Provided he is a dependent on your tax return, the following determines whether he has to file a return at all:</p>
<p>You must file a return if any of the following apply.
· Your unearned income was more than $950.
· Your earned income was more than $5,800.
· Your gross income was more than the larger of:
· $950, or
· Your earned income (up to $5,500) plus $300.</p>
<p>Did you read pub 970 from the link Kdog provided?</p>
<p>I asked a very similar question to this on another thread elsewhere and was directed to Publication 970, but the only one I can find is for 2010 taxes, nothing for 2011. </p>
<p>Does anyone know if it still applies to 2011 taxes? Like maybe they don’t update this publication every year??</p>
<p>My understanding that nothing has changed from 2010 to 2011 so the information should be accurate from the 2010 form and it is not necessarily updated every year.</p>
<p>Son’s income does not exceed 5800, even with the addition of the extra scholarship money (which I understand to count towards earned income). </p>
<p>I believe we have filled in everything correctly. The confusion remains why our return was reduced by aprox $2500 when the information was entered. TT does indicate that the extra money is taxable income what should be included on son’s return (which will not be filed), as you all have mentioned.</p>
<p>Go and look at where all the credits, refunds etc are coming from. Then back out the scholarship data and see what changes. It should be easy to see where the difference is.</p>
<p>I’m still guessing it is the AOC. If you put the tuition data in first, it would have given you the credit. Adding the scholarship/grant data would probably have cancelled it out. As I said above, the AOC is per student, so having already received it for one student would not mean you could not get it for the 2nd. However, having no qualified expenses would.</p>
<p>If it is the AOC, then make sure you have entered any money you paid for out of pocket for qualified expenses such as books. You should still be able to get the AOC for those (and they do not appear on the 1098).</p>
<p>Vandymom, I do my taxes via TT and have not had the problem. In D’s case as well, grants exceeded qualified expenses and she had a book grant. I applied $5,000 of her grant towards non-qualified expenses and therefore taxable to her, so that I could get the AOC. She will have to file and pay taxes as she also made over 3K at her summer job. But, I will pay the taxes she owes (actually, pay her for the taxes withheld from her summer check).</p>