1098-T

[tbennett0531]

Hello. My son is 18, since November. He has been going to U of M since August under the Go Blue Guarantee. So it’s free. We got the 1098-T and Box 1: $17,736.38 and Box 5: $36,867.38 is making it out that he owes almost $1500 in taxes. He does have other income from in school jobs/summer totaling $4200 or a bit over. But is there a way to make it so he qualifies for AOC? I am new to this, it’s his first year so step by step would be extremely helpful for me. The tax advice chat has not been helpful at all. Thank you. 

[KeshaH]

Currently, your son wouldn't qualify for any education credits because his tax-free scholarships/grants exceed his tuition. Because the Go Blue Guarantee program specifically covers his tuition in full, he wouldn't be able to claim this credit for tuition since he didn't have any out of pocket expenses.

[tbennett0531]

So no matter what he has to pay $1500 in taxes on something he got for school? Seems wrong 

[Hal_Al]

Q. So no matter what he has to pay $1500 in taxes on something he got for school?

A. Yes.

Q. But is there a way to make it so he qualifies for AOC? 

A. No. For two reasons: 1. As the other reply already said, all the qualified expenses were covered by tax free scholarship* and 2. The AOC law was written in such a way, that only the parents (usually) qualify for.  Full time student under 24, are (usually) not eligible. 

As mentioned at your other post, there is loop hole available where the parents can claim the AOC, on their return, if the student declares even more of his scholarship as taxable.  You can not do that if the scholarship is restricted to paying tuition & other QEE.  I'm not familiar with "Go Blue Guarantee" . But a cursory online look seems to say it may be so restricted. 

*Scholarships that pay for qualified educational expenses (QEE - tuition, fees, books and other course materials) are tax free.  Scholarship amounts that exceed QEE is taxable income, on the student’s tax return. Room and board and other personal expenses (e.g. transportation) are not QEE. 

[tbennett0531]

Thank you. He did get money back in a stipend form over the amount they gave him each semester. This covered additional expenses for him to live and he had to buy books, etc. But everything else was covered like food; he had an eating plan, and him living in the dorms. 

[Hal_Al]

Q.   But everything else was covered like food; he had an eating plan, and him living in the dorms. 

A. Room & Board (dorm and eating plan) are not qualified expenses for scholarship to be tax free.  So that part of the scholarship is taxable, even though it didn't literally pass thru his hands (get money back in a stipend form ) to be taxable income.