1098-T

[Sjmusser]

The form did actually come from the college.  So I can add that in and reduce his taxable scholarship even more?  Does the IRS get a copy of the 1098 - I know that you said what I put in TT doesn't go to the IRS, but do they get the a copy from the school with that information on it?  Thanks again all the help...I hate figuring things out for the first time and TT isn't very helpful sometimes.

[Hal_Al]

Q. The form did actually come from the college.  So I can add that in and reduce his taxable scholarship even more?

A. No. Getting the 1098-T from the college is not enough (that's fairly common). You need to verify that he was a enrolled degree candidate (that's uncommon). 

Q.  Does the IRS get a copy of the 1098 - T?

A. Yes. But they do not try to match the numbers to what the taxpayer reports.  They mostly use it to verify eligibility to claim a credit (if your college did not issue a 1098-T, your chances of hearing from the IRS go up). 

[91MR2]

My daughter received a 1098-T, with Box 1 of $16000 (tuition, room & board), and Box 5 of $7500, but due to our MAGI, we'd not be able to claim any of the AOTC on our joint return.  However, my daughter is having to file her own return due to other income she made this year.  Am I correct that she can claim up to $4000 on her return?   If so and I claim the AOTC on her return, how do I then adjust the numbers on the 1098-T listed on my return?  We are claiming her as a dependent on our return.

[KrisD15]

YES and NO.

A dependent student can claim the NON-REFUNDABLE portion of the credit ONLY if the taxpayer that could claim her doesn't.

So in other words, no one claims her, she files as a dependent and the credit can go towards her tax liability, but not as a refund. 

Form 1098-T Box 1 reports ONLY tuition, not room and board.

In your situation, if the student has a tax liability, she can elect the credit by entering the 1098-T into her TurboTax program. She must select "Yes, someone else CAN claim me" BUT "No, no one else WILL claim me"  in her Personal Info section

You in turn will elect to NOT claim her on your tax return.

You would delete the 1098-T from your return and add it to hers. 

It's an option that is not normally advantageous, but might work for your situation if you lose nothing by not claiming her on your return. 

Pub 970 page 20

[Hal_Al]

Q. How do I then adjust the numbers on the 1098-T listed on my return? 

A. Delete the 1098-T. You do not enter the 1098-T on your return, at all,  since you are not eligible for the AOTC due to income being too high.

Q.  Am I correct that she can claim up to $4000 on her return?

A. Yes, but only if you do not  claim her as a dependent. Her other income would have to be more than $14,600, if it is from working, before the AOTC would do her any good.  If she has investment or other unearned income, the filing threshold is only $1300. 

While technically there is a provision that allows your student-dependent to claim a federal tuition credit, from a practical matter it seldom works out.  A full time student, under age 24, is only eligible for the refundable portion of the American Opportunity Credit (AOTC) if he/she supports himself by working. She cannot be supporting herself on student loans & grants and 529 plans and parental support.  It is usually best if the parent claims that credit.  

If the student actually has a tax liability, there is a provision to allow him to claim a non-refundable tuition credit. But then the parent must forgo claiming the student as a dependent, and the $500 other dependent credit.  The student must still indicate that he can be claimed as a dependent, on his return. This is worth up to $2500 (AOTC shifts to all non refundable)

Note: Room and board is not properly reported in box 1 of the 1098-T.  But, schools have been known to mistakenly do so. Room & board is not a qualified expense for the AOTC.