<p>Before I left for college, I was told to save all of my college expense related receipts for the tax season? But why must I do it? Will my mom be elegible for a deductible? Will I? Why can saving college expense related receipts do?</p>
<p>Save the receipts.</p>
<p>Certain items that you spend money on count toward the American Opportunity Credit (AOC) which you or your parent can claim on the federal income tax return. Read all about it here: [Publication</a> 970 (2013), Tax Benefits for Education](<a href=“Publication 970 (2022), Tax Benefits for Education | Internal Revenue Service”>Publication 970 (2022), Tax Benefits for Education | Internal Revenue Service)</p>
<p>You also should be saving and recording your receipts so that you can begin to master the budget skills that you need for life outside of college. But that is a discussion for another day.</p>
<p>Google IRS publication 970 for education related tax benefits.</p>
<p>Only certain expenses are qualified education expenses (QEEs) for these benefits. QEEs vary by benefit. For instance room and board are not QEEs for the tax credits or for making scholarships not taxable but are a QEE for 529 account distributions.</p>
<p>If you are a dependent for tax purposes, only your parents can claim the AOC. It could reduce your parents’ tax owed by up to $2500. In fact, if she doesn’t owe much in tax, she could even get a $1000 larger refund. The only receipts you need to save are for amounts spent on mandatory books and supplies. Tuition and fee amounts paid you can get off of bills or your online account. </p>
<p>If you are lucky enough to have received scholarships/grants that are greater than tuition, mandatory fees and required books and supplies, then saving the book/supply receipts would mean you, the student, would owe less in tax on your scholarships/grants.</p>
<p>Thank you, guys. I’ve looked over the links provided. </p>
<p>I just wanted to clear up some things. The AOC credit can only be used once within the one student’s academic years? Or it can be used every year with a max limit of 4 tax years?</p>
<p>I understand that if I receive more in scholarships and grants that total greater than tuition, fees, books, and mandatory supplies; however, how does FPP factor into this? I believe FPP is a 529 savings plan, correct?</p>
<p>Does a computer purchase contribute to the AOC total?</p>
<p>And…oh goodness this is dumb question…but say I owed taxes on my excess scholarships and grants, I would pay that amount from pocket…? </p>
<p>I have saved, labeled, and organized every school-related expense receipt from the start of college. Hopefully, this pays…</p>
<p>AOC can be used for a max of 4 years of undergrad.</p>
<p>A computer would have to be specifically required by the program to be eligible for AOC.</p>
<p>If you owe taxes, you would have to file a tax return and pay taxes to the IRS.</p>
<p>No idea what FPP is. I have not heard the term used for 529 accounts.</p>
<p>AOC can be used for a max of 4 tax years of undergrad expenses. Most students’ college years fall into 5 tax years. You get to decide which 4 tax years to claim the AOC. For example first semester of college (tax year 1) Happykid’s expenses were less than $400 for books. We didn’t claim the AOC then because we figured her last semester (tax year 5) would be more expensive, and yup, it sure is.</p>
<p>From what I’ve understood from previous threads in this forum, Florida PrePaid is a 529 college savings account which gives you reduced tuition and dorming. </p>
<p>Oh, ok. Thank you for the explanation, happymom1. This first semester I paid for a $1600 laptop which is required by me engineering program so the expense can be counted. Books were about $500. That’s $2100 right there. However I used that with excess scholarship funds. That does not matter, correct? As long as it was purchased?</p>
<p>You can only used qualified expenses that were actually paid for in 2013 for your 2013 taxes. So…if you have receipts from 2012, I do NOT believe those can be applied to your taxes this year.</p>
<p>And it is your PARENTS who get this tax credit, I believe. At least that is what happened in THIS household while the kids were in college.</p>
<p>Separate issue, but you should always save receipts to have them should you need to return an item. DS#2 doesn’t and it makes me crazy!</p>
<p>Yes, I save receipts, but I don’t save them forever. I usually keep them until it shows up on my bank statement or until I’ve used the item and have to need to return it and such. </p>
<p>thumper, yes, these expenses were made for my first semester in college: 2013. This past fall. </p>
<p>I’m a little confused about the excess scholarship and grant tax that I will be subject to, though. It’s based off of what I haven’t spent of that excess by the end of the year that I get taxed on, correct?</p>
<p>Niquill. You should receive a 1098t from the college. Sometimes these are only online…so check. It will tell you the scholarship amount you received in 2013 and the amount of allowable expenses (from the college point of view…this will be tuition and fees). Any other allowable expenses you paid for in 2013 can be added to the allowable expenses. Then that amount gets subtracted from your scholarship amount. Any excess gets added to your income for the year. </p>
<p>I believe you would not be liable to PAY any taxes if your total income in including this is below a certain threshold…which I think is in the $6000 range. I am NOT a tax expert!! It doesn’t matter if you have spent it…or not. If you RECEIVED any scholarships in excess of allowable expenses, you pay taxes on them IF your total income exceeds a certain amount.</p>
<p>I would strongly suggest your parents use tax preparation software if they prepare their own taxes. We found it walked us through this process very easily.</p>
<p>And YES, if you do end up owing any taxes, you would need to pay them yourself, just like any other person filing taxes who owes. </p>
<p>To be honest, the amount in taxes you MIGHT end up owing will be very small compared to the value of that scholarship.</p>
<p>For clarity…it is likely your PARENTS who will benefit from this tax credit. It is YOU who will have this excess income on your own tax form.</p>
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<p>Will you be able to claim your D as a dependent this year? My son graduates in May and starts a $90k job at the beginning of June. No way will we be providing more than 50% of his support in 2014.</p>
<p>Niquii, here’s what you do. Add up all the scholarships/grants that were credited to your account in 2013. If you received any outside scholarships/grants that didn’t go directly to the school, add those in too. From that subtract the tuition and mandatory fees billed in 2013. Then subtract what you paid for books and required supplies in 2013(receipts required). If the result is positive, the amount is taxable income. If that amount plus all your other income, from jobs, interest/dividends etc., is over $6100 you need to file a return and pay tax on the amount over $6100. If you had any federal tax withheld from a job that amount will be subtracted from what you owe.</p>
<p>You may or may not receive a 1098T if the amount of scholarships/grants that the school knows about exceeds the billable costs they know about. Schools aren’t required to provide one in that circumstance. In any case, you should always check the amounts against your bills/online account for accuracy.</p>
<p>I just want to mention that it is very important that you and your parent both consider how each others tax returns impact the others.</p>
<p>For example, you might be able declare some of your tax-free scholarships as taxable to increase the AOC your parent can get. This might increase your taxes but could significantly decrease your parent’s taxes. Likewise you could take the maximum allowable scholarships as tax-free and result in your parents not qualifying for the credit.</p>
<p>As for the impact of the 529 plan, any expenses paid with 529 plan can not be use for the AOC. It is one or the other. Not sure how this impacts the taxability of the scholarships.</p>
<p>Yes, when the OP responds back I thought some of that would subsequently come up. For the purpose of taxability and for the AOC, qualified education expenses(QEE) are tuition, mandatory fees and required books and expenses. For the purpose of tax free distributions from a 529 for a 1/2 time or more student, room and board is also QEE. So, the 529 distribution could go towards R&B. And yes, there are some legal ways that a student can allocate additional taxable scholarships/grants to R&B and pay a little additional tax so the parents can claim the AOC. At this point we don’t know what the OPs situation is specifically.</p>
<p>You can only apply the expenses of 2013 to taxes for 2013. But if a student were to suddenly realize that there were a bunch of receipts from 2012, and that the family hadn’t filed for the AOC in 2012 but would have benefited from filing for the AOC in 2012, the family can file the appropriate number of Forms 1040x for 2012 (maybe just the parents’ form, maybe both parents’ and student’s). Somewhere in the IRS website is the information about how far back in time you are allowed to go to revise your previous years’ returns, so look for that information if you think you might fall into this situation.</p>
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It absolutely does matter. You can’t “double dip”. You can either choose to use the expenditure to make the scholarships non taxable or you (your parents) can use the expenditure to claim the AOC. The same expenditure cannot be used to claim 2 tax benefits.</p>
<p>In most cases, the AOC is the better deal as it is a tax credit. The AOC on $2100 would be $2025 (100% of the first $2000, 25% of the $100). The tax you would pay on $2100 taxable scholarship would be 2100 times your (the student) tax rate. (we always took the credit and paid our daughter’s taxes).</p>
<p>deleted-wrong place sorry</p>