1098-T Box 1 Incorrect

[tyler1717]

So here is the deal. I graduated from college in May 2020. I am trying to Claim the American Opportunity Credit. In November 2019, my tuition for Spring 2020 was posted. I saved up and paid the difference of my Tuition $14,165 and Scholarships/Financial Aid of $8,687 for a total payment of $5,878 on November 4th, 2019. When I got my 1098-T form the other day, my box #1 had a total of $7,596 and box #5 total of $8,687. When I went to work on my taxes it would not allow me to claim the American Opportunity Credit because my aid was more than my expenses. This is not true because my total cost for the spring semester was $14k. If anyone could provide guidance I would greatly appreciate it as this credit is a huge deal to my finances.

[Hal_Al · Accepted solution]

First thing: if you graduated this year it was probably your fifth calendar year of attending school Be sure you (or your parents) didn’t already claim the American Opportunity Credit (AOC) the maximum 4 times.

You can not claim the $5878 you paid in 2019 on your 2020 tax return. It had to be claimed on your 2019 return or not at all.

Fortunately there is a loop hole available.  The student reports all his scholarship, up to the amount needed to claim the American opportunity credit, as income on his return. That way, the parents  (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship.  You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.

Using your numbers : Student has $8687 in box 5 of the 1098-T and $7596 in box 1. At first glance he/she has $1091 of taxable income and nobody can claim the American opportunity credit. But if she reports $5091 as income on her return, the parents can claim $4000 of qualified expenses on their return for the AOC.

[kc4braves1]

I have used this method the last two years and amended 2017 tx return. About to file for AOTC for the last time for my student but this year her 1098T has $1500.50 in Box 4. I'm not sure why or what to do with this number when filing this year?  Hal_Al, can you help me out. Thanks.