What am I doing wrong?

<p>Filing taxes for the purposes of AOC(on ssd). I have paid a combined 6084 for the year of 2010 in books and qualified expenses (College does not separate what you are paying for they sent bill I paid it). When I input daughters 1098 on turbo tax, when I put in qualified expenses of 41778, and 50200 in scholarships, it keeps saying that she does not qaulify for this credit. I'm thinking that there must be something wrong with the numbers I submitted or the way that I put them in. Is there anybody that know what I may have done incorrectly.</p>

<p>Her total COA was 57000</p>

<p>I am not an expert but it looks to me like the scholarships are more than the expenses.</p>

<p>
[quote]
expenses of 41778, and 50200 in scholarships

[/quote]
</p>

<p>You get a credit for expenses YOU PAID. The above indicates you (the parents) had no out of pocket expenses. In fact, it looks like your daughter had scholarship money that covered room and board which would be taxable income for her.</p>

<p>Thanks thumper1. What Im trying to explain is what I paid was the difference 9200 in the cost of attendance. I did pay over 7000. This was in books and the balance the school billed and I paid. When I paid the school didn't say what I was paying for, they just sent me the bill. Again her COA was 57000, if I didn't pay she would not be in school now. How do I know what covered room and board and what I paid for anything else? Thanks again</p>

<p>Are you claiming your daughter as an exemption on your taxes and trying to claim the AOC on your return? Assuming books are only a small part of the figure you actually paid, you would need to reduce the qualified expenses reported on the student's 1098T and assume that some of that scholarship money actually paid for non-qualified expenses. This would make the net scholarship income that the student claims on her return increase. Then you can use the money you paid for qualified expenses to claim the AOC on your return.</p>

<p>Omg! sk8rmom. That is exactly what I'm trying to do. I thinkI understand what you are saying, and I know you understand my question, but when I reduce the qualified expenses 1098 it still says she does not qualify. I let this go last year because I could not figure it out, but I'm determined to figure it out this year. It took all I had to scrape up the money to pay those bills. Thanks so much</p>

<p>Just to make sure we're on the same page, SHE does not qualify for the AOC because YOU are claiming her. Therefore, only YOU can take the AOC...she just ends up with the taxable income! See the top of page 14 of Pub 970:</p>

<p><a href="http://www.irs.gov/pub/irs-pdf/p970.pdf%5B/url%5D"&gt;http://www.irs.gov/pub/irs-pdf/p970.pdf&lt;/a&gt;&lt;/p>

<p>If her scholarship covered all of her tuition and fees, and you only paid for books and materials, then whatever you paid for books and materials is what you can claim for the AOC.</p>

<p>Go to Internal</a> Revenue Service and used the search function to find the instructions for the AOC. Don't try doing this just yet with TurboTax. See if you can work it out on paper. That will help you figure out where you are going wrong with TT.</p>

<p>Yes sk8rmom we are on the same page. When it asked " how much of this was actually paid to the school in 2011 (including scholarships, fellowships or grants)?" When I input the entire COA of 57000 it gave the AOC credit. Think maybe that was the problem.</p>

<p>I do not think you can add room & board expenses for the AOC.

[quote]
What does not qualify as a qualified education expense?</p>

<p>Here is a list of expenses that do not qualify for education expenses even if they must be paid to the institution as a condition of enrollment or attendance:</p>

<p>Insurance
Medical expenses(including student health fees)
Room and board
Transportation, or
Similar personal, living, or family expenses
Education that involves sports, games or hobbies, or any non-credit course unless it is part of the student’s degree program

[/quote]
</p>

<p>^That's what I thought as well. If the 1098-T shows less "qualified expenses" billed than scholarships issued, I didn't think the taxpayer had the option of deciding whether any money they paid went towards tuition/fees or room and board. It was my understanding that in the instance OP described (scholarship income in excess of qualified expenses billed) the AOC could not be claimed, and the difference between scholarship awarded and tuition/fees/books was actually taxable income for the student. COA should not factor into the equation, only qualified expenses. Am I missing something?? I want to make sure we do our taxes correctly as well.</p>

<p>legitamate, you cannot use the COA as qualified expenses! Please read Pub 970 and separate out the tuition, required course fees (note that athletic, parking, and various other fees do not qualify), books, and course supplies. Those are the expenses you can use for the AOC.</p>

<p>Thanks for clarifying sk8rmom. That's what I thought was the correct way to crunch the numbers. You can adjust the qualified expenses amount listed by the school on the 1098-T to include books and other items defined as "qualified expenses" since the school has no idea how much you spent on those items. But in the OP's case (as in our case as well) those amount are not going to raise your "qualified expenses" amount above what was received in scholarships...so no AOC and in fact your child must claim the over and above amount as taxable income.</p>

<p>OP...I know it stinks because you're still paying out of pocket for your child's education, but I guess the best way to look at it is that your child is receiving a $57K+ education for less than $10K. A great deal in the long run, but hard to remember as you're still writing checks.</p>

<p>That's the way I'm reading the OPs issue too. The school is MORE than paying for all of the qualifying expenses.</p>

<p>Not as clear as it looks...it actually is better for legitamate to claim the AOC for her portion of the expenses paid than to have her daughter assume that all qualified expenses were paid by scholarship/grants:</p>

<p>The actual billed costs plus books was $56,284 ($50,200 paid by scholarship/grants, plus the $6084 paid by legitamate). Of this $56K, $41,778 plus books (let's say $1K for simplicity) are qualified expenses. So there is a difference of approx $13,500 between actual cost and qualified expense but only a difference of $7,422 between grant aid and qualified expenses. Assuming student has no other income, a standard deduction of $5,800 available. If the student were to use all of the qualified expenses on her return, she would report scholarship income of $7422 which would give her taxable income of $1622 and a federal tax liability of $162.</p>

<p>If legitamate wants to claim the AOC, she would back the $4K AOC limit (of her $6K contribution) out of the student's portion of qualified expenses. This would result in scholarship income of $11422 for the student but would only increase the student's federal tax by $400. Since the AOC is 100% of the first $2K and 25% of the next $2K, legitamate would receive a $2500 tax credit at the expense of $400 in increased federal tax on her daughter's return.</p>

<p>Again, it is almost always more advantageous to allow parents to claim the AOC (assuming they actually paid some expenses) than to offset scholarship/grant money on the student's return.</p>

<p>sk8rmom I was not using the COA 57000 as a qualifed expense. I used it in answer to this question. With the explaination below.</p>

<p>Verify Amounts Paid to the College
Out of the $33,778 (backed out from the 41778) that was billed by the College, how much of this was actually paid to the school in 2011 (including scholarships, fellowships or grants)? Explain This </p>

<p>Amount from 1098-T, Box 2 that was actually paid to the school in 2011 </p>

<p>Explain this
Box 2 on a 1098-T</p>

<p>Box 2 on a 1098-T is the amount that the school billed you, it's not necessarily what they received as payment from you or a lender. Check any student account statements or bank statements for amounts paid to your school if you're unsure.</p>

<p>Whewwww this is something lol</p>

<p>Legitamate, this is exactly why I keep my own spreadsheets, lol! Anyway, how did the $44K become $33K? Remember that the AOC limits are for the first $4K in qualifying expenses so you don't need to back off your entire contribution (if that's what the difference is).</p>

<p>The qualified expense from the 1098 was 41778. So I just rounded my contribution to 7000 and subtracted it to come to 33778. Sk8rmom you may be the only person in America that understands this including the irs. lol</p>