Financial Aid and Taxes

[BelknapPoint]

Now, if parents claim on their tax return that they paid 4K toward tuition, that would imply that 14k of the scholarship went toward R&B, creating tax due on the 2k over 12k. Is that correct or are the two actions not linked that way?

The parents wouldn’t claim on their tax return that they paid $4k towards tuition. This would have to be done with their child (the student) claiming on his/her tax return that $14k and not $10k of the scholarship is taxable, thus freeing up $4k of the scholarship money spent on tuition to be used as a qualified expense for the parents to claim the AOTC. This assumes that the child is a tax dependent on the parents’ return.