I would like to declare 100% of my daughter scholarships (combination of Pell and institutional aid) as taxable income so I can take the AOTC. As I understand it, this is considered earned income when determining if she needs to file an income tax return. For 2014, earned income for a dependent over 6,200 required a tax return to be filed. I have been unable to find the limit for 2015. Does anybody know when this information will be released by the IRS?
sorry that was not an official IRS website
https://www.irs.gov/uac/Newsroom/In-2015,-Various-Tax-Benefits-Increase-Due-to-Inflation-Adjustments
single person standard deduction is $6,300 for tax year 2015
Thanks.
So any dependent with earned income greater than the standard deduction is required to file a return? Makes sense.
One of the reasons I asked this is because I am doing tax planning. If my dependent is required to file a tax return then their modified adjusted gross income must be added to my income to determine the Obamacare subsidy. Otherwise, thier income is not counted. This can be a issue if you are close to the cutoffs.
You’d only need to declare $4000 of the scholarship as taxable in order to get the full AOTC. Of course if the scholarships exceed the QEE, then you have to declare the portion in excess too.