My son has more scholarships than qualified expenses, but we still want to get AOTC by moving some of his scholarships to taxable . I’m pretty sure how to handle the taxes for him, but I’m more confused on what to tell his Dad to do.
For simplicity’s sake we’ll say QE are 9K and scholarships are 12K.
For DS’s return, I entered the 1098T which then made 3K of the scholarships taxable. Then, on the question about whether or not any of the scholarship money was used towards room and board I entered 5K. The 3K that was already over and an additional 2K which we’d then use for AOTC.
For the parent return do we do the same thing?? Enter the 1098T and then alter where the scholarships went or do we just trick the software and leave the scholarship box completely empty and put 2K in box one?
I am using Turbo Tax for my son’s, but I’ll have to find out tomorrow what his dad is using. We’re divorced and he has been claiming him the past few years.
The easiest thing in my mind to do would be to just alter what is entered in the 1098T on his return. Instead of putting 12K for scholarships, put 7K. But is this allowed? Does the 1098T even get filed or is it just something the software uses to do the calculations for you and you can enter whatever you want? He would have a copy of our son’s return in his files to prove that 5K was moved to taxable if he ever needed it.
I think I did it like you described (but this was on the older tax forms as my one with taxable scholarships graduated in 2018). I think I used Turbo Tax for mine the last 2 years, and it asked what was on the 1098T, asked if that was correct, I said no, and then put in the numbers like you described. You have to do a little more adjusting with the numbers as you have things not on the 1098T like books and supplies, but it works.
The 1098-T isn’t filed with the return, but the school has provided a copy to the IRS. I don’t use tax software so I can’t address your specific questions about what kind of entries to make to get the result you want. Hopefully folks with Turbo Tax and Free Tax USA experience will know the answers.
I believe on the parent return you do exactly as the first thing you said - Enter the 1098T and then alter where the scholarships went. I then like to go to the forms view and make sure everything looks as I want.
Thank you. I went through and pretended I was claiming him on mine and that seems to be what you need to do in Turbo Tax. Hopefully his software is similar.
Well, TaxFree USA was a little different with the inputs, but he ended up with the exact same credit amount that I did (only he actually gets to use it all).
Coordinating three returns to try and maximize education benefits was an interesting exercise…