Can we choose to make scholarships taxable?

Paying for College
1

<p>My dd has various scholarships from the school, delegates, senatorial, plus private. They equal a little more then tuition and fees. Am I allowed to choose part of them as taxable. Say, tuition is $7500, and scholarships are $8000. She made $3500 at her her summer job. If I choose to make $6000 taxable, then she’s still under the filing threshold, and we can claim the $6000 toward the education credits? Is this legal?</p>

<p>Also the 1098T lists the tuition and fees or both fall 2013 and spring 2014, but only the scholarships for fall. I had to pay the spring bill by 12/20/13, but the scholarships weren’t applied until Jan 2014. How do I handle that?</p>

2

<p>Regarding your first question - yes, generally you can make scholarship money taxable in order to claim the American Opportunity Credit. The max credit is $2500 on $4000 of tuition (so for these purposes, you’d want to make just $4000 in scholarship money taxable). Refer to IRS Publication 970 for more information.</p>

<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf”>http://www.irs.gov/pub/irs-pdf/p970.pdf&lt;/a&gt;&lt;/p&gt;

3

<p>See pub 970 <a href=“Publication 970 (2022), Tax Benefits for Education | Internal Revenue Service”>Publication 970 (2022), Tax Benefits for Education | Internal Revenue Service; American Opportunity Credit, section Coordination with Pell grants and other scholarships, Example 3-Scholarship partially included in income.</p>

4

<p>Thank you for the information and the link. I had looked and couldn’t find that. That makes me happy. Now, I need to know if I can use the the scholarship money received in January for Spring semester, or do I wait for next year. It wont matter, either way. I think I will do it by tax year.</p>