Tax treatment of one scholarship and two different schools

Paying for College
1

<p>If a school gives you a scholarship that exceeds their tuition by $5,000, then the taxable part of your scholarship would be $5,000. </p>

<p>Say the above applies to you, and you take two classes that cost $2,000 at another school in summer of the same tax year. Then your taxable income would be $3,000? Or could you keep the taxable income at $5,000 and the parent of the dependent student claim the $2,000 for the American opportunity credit? How would you be able to legally maximize credits in this situation? </p>

<p>I am assuming expenses for books would be acceptable for the American opportunity credit regardless of how much scholarships are because they would be purchased with taxable income.</p>

2

<p>bump
…</p>

3

<p>Take a look at post #5, I think it applies to your situation:</p>

<p><a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/1084458-byrd-scholarship-designation-question.html[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/1084458-byrd-scholarship-designation-question.html&lt;/a&gt;&lt;/p&gt;

4

<p>Yes, required books are qualified educational expenses along with tuition and fees.</p>

5

<p>Yes, if it works out in your favor, you can elect to have the student take only a portion of the qualified expenses to offset scholarships and have the parents use the balance as qualfied expenses for the AO credit.</p>

6

<p>Thanks so much for the very helpful replies. I think I got it now. If the scholarships to the main college where the student is rooming and boarding are not explicitly mandated to be used for tuition and fees, you can exhaust scholarship funds left over after paying tuition and fees to pay for room and board, and then the parent can claim paying the tuition at the other schools for the AOC. Just be sure to not deduct from the student’s income the tuition showing up on the 1098-T from the other schools in order to reduce his tax burden, and thereby avoid the “double dip.”</p>