He had $0 in a college fund for me. I chose my college because he wouldn’t pay for anything, so I earned scholarships and work. My mom is a stay at home mom. I heard he can get like $5,000 for me being in college, even though I’m a full scholarship student. I also heard he’s bragging to colleagues that he’s paying for my college.
You might be referring to the $2500 American Opportunity tax credit. If he files a joint tax return with your mother, and you are a dependent on their tax return, they can receive this tax credit. They do have to show that they paid at least $4000 towards your college expenses. The 1098T form you rcvd from the college has the amounts. Obviously you don’t like this, but that’s how it works from a tax law standpoint.
There are a number of potential tax issues depending on how much scholarship money there was and what those scholarships were intended to cover. Get out your original award letter(s), print out your bursars statement from your college, ask for tax advice at your college/university, and then talk things over with your mom and step-dad.
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If your scholarship covered your meals and housing in addition to the “qualified expenses” of tuition, fees, books, and materials, you might owe tax on part of your scholarship money. Also, in this case no one would be able to collect the American Opportunity Credit because neither you nor your mom and step-dad had any qualified expenses.
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If your scholarship was a set amount of money, rather than a specific award that could only be applied to one thing or another, it may be possible for you to consider that the money was applied toward living expenses (and thus taxable), and any student loans that you took out considered to be applied toward qualified expenses. For some families, this trade off (more taxable income for the kid but parents can get the AOC) results in a better overall tax results for the whole family.
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If you, your mom, and your step-dad did have some qualified expenses last fall (say $600 worth of books), then if you are considered their tax dependent for 2014, they can claim those expenses and get a partial AOC. If you aren’t their tax dependent for 2014 you can claim the AOC yourself. Talk things over with a tax advisor at your college/university. You might not be a tax dependent for 2014.
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The AOC can be claimed in four tax years. However, it is likely that you will be an undergraduate for parts of 5 tax years. If there was only a tiny bit of money to be claimed for 2014 (fall freshman year), but it looks like the figure might be bigger in the spring of your senior year, you all may want to not claim it for 2014.
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All the parents I know take every cent they get back from the AOC, and put it straight into paying the next bunch of college bills. I don’t know anyone who pockets the money for themselves. Even if you have a sizeable scholarship, surely there are a few expenses left over (books, travel to and from college, etc.). Ask your mom to set the equivalent of any AOC aside for those expenses next year.
If he didn’t pay for anything college wise, he can’t possibly claim a credit for what he didn’t pay.
We were always income limited from claiming that credit, but my son was able to claim it on his tax form his last year in college, as we did not claim him as a dependent. We didn’t ask for any of it back, we let it go to him to lessen the misery of taxes.
^^“He can’t possibly claim a credit for what he didn’t pay.”
Publication 970 says differently. See page 18 under *Who can claim a dependent’s expenses *
“Publication 970 says differently. See page 18 under Who can claim a dependent’s expenses”
I wasn’t as precise as I intended. I didn’t mean WHO can claim the expenses, but if there were no expenses (ie full scholarship), then how can anyone claim it?
See Publication 970 regarding including scholarships in income in order to take the AOTC.
For the AOTC, parents can treat amounts paid for QEE by a tax dependent student as though the parents paid the expenses.