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1098-T; 1099-Q & American Opportunity Credit

Help!

I'm getting turned around and twisted up trying to determine which forms go on my return and which go on my dependent's, while trying to maximize educational credit.

1099-Q = on dependent's?
1098-T = on my return?

Tuition = $58,578 + Room & Board = $15,086 for total of $73,664
Scholarship & grants = $60,200 Out of pocket = $13,464, (should this all be applied against room & board?) but $10,591.22 paid with 529 plan distribution (1099-Q)...by trial & error I maximize the AOC by inputting $4,600 as portion R&B paid with scholarship/grant - in which case this would be dependent's income?
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Dependent earned income = $4,635; entering the 1099-Q info on dependent's return increases tax liability by $835; not including any amount that needs to be added as additional income from above

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2 Replies

1098-T; 1099-Q & American Opportunity Credit

here is how it works:

 

1) the 1098T goes on YOUR tax return, so that you can maximize the aotc credit.

2) from your comments, i assume that Box 1 of the 1098T is $58,578 and that Box 5 is $60200

3) in order to take advantage of the maximum amount of the AOTC credit of $2500, you have to reduce Box 5 of Form 1098T to $54, 578.  That will make the difference between Box 1 and Box 5 at exactly $4000. 

4) That means Box 5 was reduced from $60,200 to $54,578 or $5,622.  This is taxable income to your child (more later)

5) the 1099Q is associated with whomever's social security number is on the form.  

6) your total expenses appear to be Form 1099T / box 1 of $58, 578, less box 5 of $54, 578, less the $4000 that was consumed to generate the $2500 tax credit.  So now we are at zero. 

7) you had additional expenses of $13,464 (room and board, etc) and you have a distribution from the 529 plan of $10,591 (box 1 form 1099Q) since the expenses EXCEED Box 1, there is no need to put this on your tax form (or your childs).  Look closely at the instructions on the 1099Q and it states that you are to determine if anything is taxable and since you have determined that nothing is taxable, there is nothing to report (read it closely)

😎that leaves your child's tax return.  Fill out the 1098T but only put $5,622 in box 5.  that will create taxable earned income on Line 1 of the 1040 and it will be marked with 'SCH"

9) since the dependent's earned income is $4635 plus the $5622 is less than the standard deduction of $10,607, there should be NO income tax due, In fact, if there were no withholdings on the $4635, there is no requirement to even file a tax return.  

 

please read this slowly, it will work, but this whole area of 1098T, 1099Q, AOTC is complicated! 

 

Carl
Level 15

1098-T; 1099-Q & American Opportunity Credit

In a nutshell:

The 1099-Q gets reported on the tax return of the individual whose SSN is listed on that 1099-Q.

The 1098-T goes on the parent's tax return if the parent qualifies to claim the student as their dependent, and the parent actually does claim that student as a dependent on their tax return.

 

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