So - I have been unable to find a specific answer to this on the forum. My daughter goes to University of Michigan (an accredited school) and attended a study abroad program through that college which was apparently Non-accredited. Here is what I cannot figure out: University of MI sent her a 1098 T showing roughly $40k in grants and scholarships for the entire year (this is normal for her). However, the amount of qualified payment to MI is only $16k instead of the usual $32k, because she only did one semester at the school, while the other was in Spain. The other $16k that normally would have gone to MI was used to pay for the non-accredited school in Spain. It is my understanding that it does not appear I can claim her Spain tuition on my taxes since the school is non-accredited. However, Turbotax also told me that the roughly $16K dollars that was not used at MI would need to be claimed as income - possibly on my daughters return. Try as I might, I can not find any info on how to either mitigate what looks to be thousands in taxes due, or in the worst case scenario - where to claim that money as untaxed income on either my, or my daughters taxes. Its not like there is a 1099 for the loan. I'm trying to figure out the correct way to proceed or document the money..?
If Box 5 exceeds Box 1, the 1098T goes on your daughter's tax return. It is income to her, hopefully at a much low income rate than your are in.
ok great - thanks for the info. Such a simple answer, don't know why I could not find that anywhere else. Maybe it was just me.
the whole area of 1098T and 1099Q is a confusing and complicated topic; welcome to the club.
NC - if you see this message -
So - I move it to her taxes...this is true regardless of the fact that I am claiming her as a dependent, correct? So I just remove the 1098 from my taxes and attach it to hers then? Just making sure I'm understanding, because its going to apparently cost me about $4000 thus far as near as I can tell...
Yes, you do not enter the 1098-T on your tax return, as you will get no benefit from it in the form of a tax credit or deduction.
Your daughter would enter it on her tax return.
she remains your dependent on YOUR tax return (so you can get the up to $500 credit)
on HER taxes she reports the 1098T because Box 5 exceeds Box 1. Hopefully her tax rate is a lot lower than yours.
Why is it going to cost you $4000 (is that if the 1098T stays on YOUR tax return, which is isn't)
$4000 is the amount of expenses you need to claim the maximum $2500 amount of the American Opportunity Credit (AOC). So, it would be $2500 that you might lose. But, you don't have to lose it. Claim $4000 of expenses on your return, for the AOC, and have her claim $4000 more as scholarship income on her return.
Furthermore, even though the $16,000 spent in Spain was not on the 1098-T, some of it is still a legitimate expense to use tax free scholarship for. The part of the $16,000 that went for tuition and fees is tax free. The part that paid, for travel, food and lodging is not.
My daughter goes to University of Michigan (an accredited school) and attended a study abroad program through that college which was apparently Non-accredited.
why is the part of the $16,000 a legitimate tuition and fees if the school was not non-accredited?
Depends on the word emphasis.
My daughter goes to University of Michigan (an accredited school) and attended a study abroad program through that college which was apparently Non-accredited.
I concluded they assumed that solely based on the fact that the $ were not on the 1098-T. I think it's apparent that this was part of the U of M curriculum and the scholarship was for that purpose.
NC - No - the $4000 was when I filed it on HER return with her as my dependent. I have now been able to get the amount she owes down to about $1200 by having her file as NOT my dependent, and saying that she provided more than half of her own support. I lose the deduction for her on my taxes, but the $3000 (that I'M going to have to end covering anyway) savings more than makes up for it. Not going to lie - I'm clearly no tax expert - hence my post here. All I am doing is answering the questions Turbo Tax asks on the her and my returns, and watching the amounts we owe change at the top. Turbo Tax is actually happier now anyway, because it said I could not claim her as a dependent in the first place - because she made $5200 at her part time job last year, and only lived with me for roughly 3 weeks out of the year....even though I specified that she did NOT pay for 50% of her living expenses.
I did some research, and my understanding was that if your child is away at school (which she obviously is) that was to be counted as living with you....but TT still said I couldn't claim her. I still don't understand why, but it ends up working out better anyway, as I mentioned above. $1200 instead of $4000 is a plus. I'm open to any further knowledge you wish to dispense, but my brain hurts from this 1098-T BS. Its usually not an issue - its just that one semester last year at the "non-accredited" school that's screwing me.
Hal - yes - the program was through Michigan, but the school in Spain is non-accredited as far as the US loans go. Apparently, as I am learning now, this is extremely common, and there are literally only a handful of programs that are accredited. I'm still trying to double check with U of M, but I spoke with the study abroad program directly, they basically told me - "Yeah - you're screwed". I spoke at length with the paper shuffle people there and told them I just basically needed a 1098T from them to prove where the money went. She told me in no uncertain terms that the rules strictly forbade them from issuing any such because the school was not accredited through the govt loan program.
She sent me a copy of the cost breakdown of the program (which I already had) - but - if I understand it correctly, the bottom line is most simply this: The Govt will not allow the use of their loans on a tax free basis for school curricula that have not been approved through their process. It doesn't matter if the curriculum was approved by a school program they HAVE approved - the program in question must be approved directly, and if its not, while you can still use the money for said program, you're going to pay taxes on that portion of the loan as if it were income....if I understand what they are telling me.
Your daughter can NOT file as "not your dependent". Scholarships/grants are not self support. They are third party support. You appear to be using the terms loans and grants interchangeably. They are not the same. Loans that you didn't co-sign are self support for your daughter. Does U of M give her credit for the courses taken in Spain? If so, I don't think it's clear cut that the study abroad was not eligible (accredited).
Hal - Why would you say my daughter can't file as 'not my dependent"? I answer the questions that Turbo Tax asks, and it flat out tells me I cannot claim her based on her income from her work study job at the school, her U of M 1098-T, and the answers given. Are you saying TTax is wrong then? If so - I wouldn't even know how to address that except to go somewhere and pay to get my taxes done.
As for how clear cut the study abroad accreditation is, regardless, nothing changes the 1098-T from U of M that shows box 5 (Scholarships and Grants given by U of M) at $38k, and the amount in box 1 (payments received for accredited education) at $16k. This leaves roughly $22k spent on 'non-accredited' education, which is not tax free, so taxes must be paid on the 22 as if it were income. At least - that is how its been explained to me...?
"Why would you say my daughter can't file as 'not my dependent'?"
I assumed your daughter is normal college age, under 24. There are two types of dependents, "Qualifying Children"(QC) and standard ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student status, a relationship test and residence test. Only a QC qualifies a taxpayer for the Earned Income Credit.
While the excess Scholarship is her income, it is not self support provide, under the QC rules. I don't know if TT is wrong (unlikely). But I also don't know what details, on your student, you input.
A child of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:
So, it doesn't matter how much he earned. What matters is how much he spent on support. Money he put into savings does not count as support he spent on him self.
The support value of the home, provided by the parent, is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants.
See full dependent rules at: https://turbotax.intuit.com/tax-tools/tax-tips/Family/Rules-for-Claiming-a-Dependent-on-Your-Tax-Return/INF12139.html