Prepaid Tuition/Taxable Scholarships/AOTC question

mommdc
Wed, 20 Feb 2019 15:14:14 +0000

Your calculations are correct.

You might need to see how much kiddie tax would result from having $14,000 in taxable scholarship income plus $5,500 in work income. $19,500 in total income minus $12,000 standard deduction would result in $7,500 taxable income and kiddie tax of about $1,400 (7500-2550)x24% plus 255 I believe.
AOTC would be $2,500 on $4,000 AQEE if you qualify income wise.

If for example you only claim $2,000 of AQEE towards AOTC, then AOTC would be $2,000 but only $12,000 of scholarship would be taxable and then kiddie tax might be almost $500 less.

It’s the same net result. It depends on whether you have the $1400 or $900 to pay the tax and what you want to do.

You can amend previous years’ taxes if it would be beneficial.