Use Scholarship for Lifetime Learning Credit

[rbrot249]

Hello,

I am trying to figure out if it is possible to apply some of the scholarships as income in order to claim the lifetime learning credit. For example, the lifetime learning credit's cap is $10,000 which gives a 20% or $2,000 credit. Can I report $10,000 of the scholarships/grants in box 5 of the 1098-T form as income in order to get this credit? 

Thanks!

[IsabellaG]

It is possible, but not if the scholarship is specifically designated for tuition or other qualifying educational expenses. In other words, if the scholarship can be applied to Room & Board or other non-qualifying expenses, you could report some of the scholarship as taxable income in order to claim the Lifetime Learning Credit. See this discussion, and also the wording of the 1040 Instructions for LIne 50, Education Credits.