1098-T - Whose return should it apply to? Parent or child?

[naru_01]

I am a parent.

•  I have a child <24 years old
• Child is a full-time undergrad student and has not graduated yet
• Child has earned income on a W-2 of $9700
• Child has unearned income of $1650 from (1099-INT and 1099-DIV)
• Child has unearned income of $4500 investment income (1099-B)
• I (parent) have claimed the child as a dependent, and the child has reflected the same on their return.
• I (parent) do not qualify for any credits because of MAGI
• The child has received a 1098-T form from the college.
  • Box 1 has $52,000. ($33000 was paid by the parent)
  • Box 5 has $19,000. The $19000 was a credit received for being an RA.
    • $15000 out of the $19000 was a credit for Room and Dining.
    • $4000 was a tuition credit.
• When I file the 1098-T as a parent, my tax burden does not increase. However, if I file the 1098-T under the child's return, the tax burden goes up by $3000+.
  
  My question is, whose return should the 1098-T be included? Parent or Child?

[AmyC · Accepted solution]

If the $15,000 in box 5 was restricted to room and board, it is student income. If it can be applied to tuition then you could eradicate the scholarship.

You are looking at the child filing along with the Kiddie Tax.

[naru_01]

Thanks for the prompt reply.

The college bursar monthly statement explicitly specifies in the description that the $15,000 is a credit for room and board. So, at this point, should I just file the 1098-T under the child's return and categorize it as taxable?

[KrisD15 · Accepted solution]

Yes, since you can't use the expenses for a credit, there is no reason for you to enter Form 1098-T into your TurboTax Program. 

The only other point to make is that it may be possible for the student to claim the non-refundable portion of the American Opportunity Tax Credit. 

If claiming the student has no advantage for you, you can elect to not claim him. 

The student then files and selects 

"Another taxpayer can claim me on their tax return"

but on the drop-down they select 

"Another taxpayer will not claim me in 2024"

The "not-claimed dependent student" enters Form 1098-T into their TurboTax program. 

Please make sure he indicates that the scholarship was restricted to room and board. He will be taxed on the scholarship. 

However, since there is excess education expenses, he should be eligible for the "non-refundable" portion of the American Opportunity Tax Credit which will be applied to his tax liability. 

IRS Pub 970