Attach the receipts to the tax return? No.
Also in our case my D is not reducing the taxable scholarship amount by the cost of books, instead we are claiming the book expense for AOTC.
For example if yearly book expenses are $600, then if your parents would have a 10% tax rate and if that whole amount was taxed, you would pay $60 in taxes.
But if you claimed $600 for AOTC, 40% of the credit is refundable so your parents could get $240 of it back.
At least I think that’s how it works.
Just keep receipts in case there is ever an audit.
If a class was dropped and only part of the tuition was refunded, the taxpayer (meeting other conditions) could claim AOTC on the unrefunded tuition.
If you spend $500 on books and get a $500 scholarship for books, it’s a wash. You have a $500 QEE and a $500 scholarship. If you want to claim that $500 as part of your AOTC, then the student has $500 of income. It’s no different than if the scholarship was for tuition or fees. If the scholarship is for a QEE, no taxes unless you want to claim an AOTC.
IMO, Once you buy the textbooks, they become your personal property and you can keep them or sell them or give them away, really no different than if you have a sofa you want to sell. Is it income under the IRS code when you sell your sofa? I don’t think so unless it becomes a business.
Scholarships for books aren’t all that rare. Many athletes have them, and they go to the bookstore and get what they need and the bill goes to the athletic department and is paid with the book part of the scholarship. Those books then belong to the student, and most do sell them or give them away when they are done with them.
Thanks all for the info. One more question: I understand that I’m required to file my own return due to the $ amount, is that correct?
Yes and probably include Form 8615 as well.
@twoinanddone RE #24 -
I think I agree with you, but could you clarify what you think the student could deduct if she pays $600 for text books required for classes over two semesters, say Spring '15 and Fall '15, then she turns around and sells some of the spring ones in the fall for say $200.
Some of the posts in this thread seem to imply she could claim only $400, while other folks seem to think she could claim the full $600.
Wait Form 8615 says “for unearned income.” Aren’t scholarships considered earned income?
For purposes of the “kiddie tax” (Form 8615), taxable scholarships are considered to be unearned income.
It’s my opinion the once the textbooks are purchased, they are personal property. They are a QEE in the year purchased, by definition, so makes no difference if used for one or two semesters, or even forever, and are aotc eligible in the tax year purched; you dont protate the purchase price over seveal years if the book is required for seveal semesters, and you don’t get to include the purchase price again for a second semester use if you already own the book. What you do with personal property in other tax years doesn’t matter, as sale or disposal of personal property isn’t a taxable event.
I don’t see anything in the tax code that requires you to sell textbooks or reduce future QEE amounts by the amount you received for sale of personal property. Yes, other opinions here are that you should reduce the QEE, but I don’t see the instruction to do that, to buy the cheapest textbooks, to rent if that is a cheaper option. The books count as a QEE if required for the class, and that’s all it says.
Does that mean that if you rent a textbook you cannot deduct the cost of that as part of QEE?
No, if you rent you can include the rental cost as a QEE, but not the full cost of the book because you didn’t pay full price. Same as if you bought used for less money, you can include the cost you paid.
There is no requirement to take the cheapest option, or to recoup any money paid. Include what you paid in QEE.
Sale of personal property at a gain is taxable.
^ All textbooks will be sold at a lower price, so no gain