It’s very confusing to figure out! My S22’s 1098T calls out a housing scholarship specifically. But the one covering tuition is just “presidential merit schol”, but the amount is equal to the tuition. Then there is a stipend and he uses that for books fees and food. This is the first year I think we could have him pay taxes on an extra amount so that we could get the AOTC. Since it doesn’t call it tuition, should we be good? Or should we keep it to the books and fees, etc that he pays from the stipend?
Or a Johnson at W&L as an example.
I’d check out the AOTC chapter in pub 970, specifically the section on coordinating the AOTC with Pell grants and other scholarships. (You might have done this already).
As long as the terms of the scholarship do not restrict the use to qualified expenses, it doesn’t really matter how the university applies the funds. That is, the university applying a scholarship to tuition first on the bill does not prevent the student from applying a portion of the scholarship to nonqualified expenses in order to be eligible for tax credits.
Whether the terms restrict the use of funds to tuition is something the university should be able to answer. There are plenty of cases where “full tuition scholarships” or scholarships equal to full tuition are not actually restricted.
Yes, a full ride Johnson…the part for room and board might be taxable if the student exceeds the standard deduction.
You can’t double dip. If he uses the stipend for books, that’s fine and not taxable but then you can’t use the book fee to get the AOTC because he paid it from funds that are already tax benefited (the stipend or the scholarship). The stipend used for food is taxable and can’t be used for AOTC. The amount paid for student fees may or may not be taxable; if it is for insurance, transportation, athletics, it’s taxable if paid by a scholarship and if you pay by cash it doesn’t count toward the AOTC (it’s not a QEE)
If you pay $4000 OOP for tuition, you can then take the AOTC but the $4000 ‘moved’ to another fee, like for room and board, might become taxable to him.
I think I worded it poorly. I understand the double dipping and not being able to I need to sort it all out in my head and make a spreadsheet with the possibilities and take notes.
I’m on my daughter’s turbo tax account from last year and can’t even find the question that took her from owing a ton which I knew was wrong to owing nothing.
But once you click it - it takes it down.
Turbo tax layout is not good - which is why I keep saying I’m going to switch. Yet I was at Costco and bought it again.
She had 3 tuitions (3 schools) due to summer at UTK and the u of sc Hinors dc semester in addition to her regular school.
Those added up to 31.7k
Her 1098T shows $39.1k
Wages were just over $17k as she had both a summer and fall internship.
I’m not sure if the nuances but once I clicked the box - like did I withdraw from the hsa only for educational expenses, the tax owed reverted back to the screen b4 I added up all the #s.
I think my comment was not related to tax but hsa withdrawal now that I think about it. It was taxing the withdrawal. So it might have been on my account where I had to do it like 5 times til I found the box noting they were qualified expenses.
It’s all very complicated - all these rules.
I think it’s in part why when one of the magazines gives documents to ten different accountants, they get back 10 different amounts owed/refunded. No one can do it exactly right.
So doing taxes.
The 1098 T shows payments received box 1 38k and change.
Box 5 43k in scholarships.
If I say the dufference (5k) was used for room and board it says all 43k is taxable.
How can that be ?
Mathis is one of those things I have to play around it to get it right.
I have to get the summer 1098t. Our tuition was far more than the small scholarship but this trips me up.
A scholarship shouldn’t be taxable.
If only 1/10 of it was begins tuition, why would the student be taxed on all of it ??
I’ll figure out how to correct it but this is where I get confused.
If someone gets a full ride so it exceeds tuition, they have to pay tax - like the W&L Johnson ?
Seems improbable to me.
My son has had to pay tax on his scholarship that was over the cost of tuition. He has worked during the school year and had well paying internships in the summer so his income plus scholarships for room and board well exceeded the standard deduction. It was a huge surprise the first year and since he has more money taken out of his paychecks to help offset the scholarship. There supposedly is legislation coming through to make all scholarships taxable even the part that cover tuition!
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But dud he pay tax on the differential or entire thing. Turbo tax is saying the entire.
I’ll get it fixed. Every year this happens and every year in their interview I get it fixed.
Is this only merit and not need based ? No way a low income kid could handle .
I just think turbo tax stinks. But I always find the hidden question to get it to revert itself.
Interestingly she paid tuition for summer - different school - which doesn’t have a 1098 because there was no money - but there’s no where I can find to enter. That will make costs for tuition above the scholarship.
Thanks for responding.
Tax is only on the part not used for tuition, books, fees. The amount put into the box for how much is used for room and board should be the amount that shows up on line 8r on schedule 1. That amount goes into the calculation on the 1040 form. Check schedule 1 and see if it’s showing $5k or $43k.
And if earned income is not greater than 50% of the support, the unearned income will also be subject to Kiddie tax (form 8615). So, it may seem that the entire amount is being taxed because it is taxed at the parent rate, not the student rate.
They are not taxing me. They are saying it’s taxable to my kid. They put my note on that statement. I think if I remove the 1098 altogether my tax liability stays flat.
Maybe when I do her return it will clear up.
Ok.
Thx
It’s just odd that only the differential wouldn’t get it. I’ll figure it out. I do every year. Thx
Ps I only have line 1,5. I’ll see if they include a schedule 1. Thx
Maybe. The amount for room and board is taxable. It would depend on the amount and if the student has other income. If the room and board costs are below the standard deduction for the student AND they have no other income, it’s likely they would owe no federal taxes.
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Right…this isn’t a parent tax…it’s tax on the student…for aid received that exceeds tuition, fees, books.
But the kiddie tax could apply…meaning your kid is taxed at your rate.
Ok. So mine went abroad in summer and made so little she didn’t get a w2. Worked a few shifts at the hote she used to do events for.
So if it’s only the 5k differential she’ll be good.
Terrible law though but taxing on the entirety would be worse. So many couldn’t attend college.
Thanks for the explanation.
Merit or need based…it doesn’t matter.
The amount of taxes owed is far less than what the person would pay for attending college.
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And lastly…when my kids were in college, any 1098T info was for THEIR tax return. It was never entered on my tax return at all, IIRC. Has that changed?
This is income for your daughter…NOT you, I believe.
Yes. Turbo tax asks for it. Then it adds a boat load in taxes. Then you enter in how much you took from the 529 and it comes off.
I’ll triple check when I get home. I’m powering through.
Thx
But it did give the note aboit my daughter having to follow - so all your and everyones info above tracks that. Was hoping I didn’t have to this year as she has no reportable income.
So learning a lot.
Thx
What does your HSA have to do with this??
529 sorry. Same concept.
Same thing happens. Turbo tax adds based on my withdrawal. Then it asks if they were qualified expenses and it comes right off
Turbo tax ‘interviews’ you.
I don’t love it yet I keep using it.