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Can I "choose" which money paid for what at tax time (loan and scholarship)?

SchadretSchadret Registered User Posts: 146 Junior Member
Simplistic example - tuition + room and board are $5.5k each, total $11k. Child takes the 5.5K federal loan, and gets a 5.5k scholarship.

I have no idea in which order the school actually applied the money, we just see 2 credits for 5.5k each, and then 2 charges of 5.5k each for the tuition and room and board.

Can I just "choose", when doing taxes, that the scholarship was used for the tuition so it isn't taxable income?

Replies to: Can I "choose" which money paid for what at tax time (loan and scholarship)?

  • thumper1thumper1 Registered User Posts: 76,168 Senior Member
    Yes...you can apply the scholarship to tuition. UNLESS...it’s a scholarship that is specifically awarded for room and board.

    You can also add in the cost of books to the tuition costs.

    @BelknapPoint
  • ordinarylivesordinarylives Registered User Posts: 3,195 Senior Member
    What @thumper1 said. However, you may consider reporting $4000 of the scholarship as taxable income and claiming the AOTC. The taxes on $4000 may be less than the tax credit.
  • mommdcmommdc Registered User Posts: 11,267 Senior Member
    This is what I will do.

    Total QEE tuition and fees and books

    Minus $4,000 claimed for AOTC

    Equals AQEE (adjusted QEE)

    Total scholarshops and grants (can be used for any expenses) minus AQEE equals taxable part of scholarships.
  • BelknapPointBelknapPoint Registered User Posts: 4,310 Senior Member
    What @thumper1 said. However, you may consider reporting $4000 of the scholarship as taxable income and claiming the AOTC. The taxes on $4000 may be less than the tax credit.

    I agree. I understand that OP's numbers are "simplistic," but it's quite possible that if the scholarship money is reported as taxable, all of the student's taxable income will be covered by the standard deduction and therefore no tax will be owed. A significant education tax deduction might then be claimed by the parent(s).
  • mommdcmommdc Registered User Posts: 11,267 Senior Member
    For example my son has $7,600 of tuition, fees and book expenses (QEE).
    I will use $4,000 to claim AOTC.
    So AQEE is $3,600
    His total scholarships and grants are $7,700 so taxable amount will be $4,100.

    Since your son contributed $5,500 to his expenses with his loan, make sure you have contributed more than that to his support this year, to be able to claim him as a dependent. Scholarships are not counted in the support test.
  • BelknapPointBelknapPoint Registered User Posts: 4,310 Senior Member
    A significant education tax deduction might then be claimed by the parent(s).

    Correction: this should say "education tax credit" (too late to edit the post).
  • SchadretSchadret Registered User Posts: 146 Junior Member
    Thanks everyone for the info!
  • twoinanddonetwoinanddone Registered User Posts: 21,925 Senior Member
    My daughter had two scholarships that could only be used for tuition, but I just added up all the scholarships and subtracted the QEE and reported the rest as taxable. No one ever asked for it to be broken out (like the IRS).
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