1099T and AOC

[lyds0404]

HI there, hoping someone can help me.

My daughter attended one college from Fall 2021, through Spring 2023. She changed schools in Fall 2023, still working towards bachelors degree. First college she had pretty good scholarships towards her 42k a year tuition/room/board, but we still paid over 16k a year. Second college got some but not as much and I took 8k in parent loans in Fall 2023 and also paid some in cash. Just over 11k.  

I got the second schools 1099T first:

box 1: 11,255.39

box 5: 4744.00

box 8: checked

Said she qualified for AOC 2500

got 1099T from first school she no longer attends

box 1: 16,080

box 5: 34,109

box 6: 19,117 (never had one with this box filled in)

box 8: checked

Now says she doesn't qualify.

How on earth can she not qualify when we spent literally thousands on tuition????  Why is that number in box 6? What does it mean and how do I fix this?

(Side note, I was in grad school (LLC qualified), husband in undergrad (AOC), first child grad bachelor dec 23 (AOC 2500), third child community college (AOC 1901), so we definitely qualify)

Thank you for your guidance.

[DaveF1006]

The maximum educational credit that can be claimed per year is $2500. She has reached that limit.

Maximum Educational Credit per IRS

[Hal_Al]

You don't get a 2nd $2500 for attending a 2nd school. It's $2500 (max) per student, per year.  If the first school had gotten you less than $2500, then you could use the 2nd school tuition to get the difference. 

[lyds0404]

no she hasn't, I have 3 children in college. They are saying the particular child with these 1098T from 2 different schools doesn't qualify. She does because we paid well over 20k for her tuition.

And I am trying to understand why there is something in box 6.

[lyds0404]

they did not give this child anything. I know they only get up to 2500 each, this is a different child, I have 3 in college and they did not give this child any credit. They say she does not qualify for it, which does not make any sense. I think turbo tax may have an issue, but it gave it to me for my other children. 

Also trying to understand why there is something in box 6 and what that means.

[lyds0404]

when I only had one 1098T entered in turbo tax for her (the current school) turbo tax said she qualified for 2500 AOC. When I added the previous school (from spring 2023), turbo tax took the credit away completely and said she didn't qualify for anything. This does not make any sense.

Can I just leave the previous school 1098T off???

[Hal_Al]

Q. Can I just leave the previous school 1098T off?

A. Yes, that's exactly what you do.  

I assume the student is your dependent and you are entering the 1098-T on your tax return, to claim the credit. 

The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. You claim the tuition credit, based on your own financial records, not the 1098-T.  

If you claim the tuition credit, you do need to report that you got a 1098-T or that you qualify for an exception, so you do need to enter the 1098-T.  (the TurboTax interview will handle this)

I will post a separate reply describing what you report on your daughter's tax return. 

[Hal_Al]

I got the second schools 1099T first:

box 1: 11,255.39

box 5: 4744.00

got 1099T from first school she no longer attends

box 1: 16,080

box 5: 34,109

Your student has $27,335 of qualified educational expenses (QEE) and $38,853 of scholarship. $4000 of the QEE was used to claim the AOC, on your tax return,  leaving $23,335 covered by the scholarship.  Scholarships that cover QEE are tax free. Scholarships that cover non qualified expenses (mainly room & board) are taxable. At this point, your daughter has $15,518 of taxable scholarship. Since that is more than the $13,850 filing requirement*, that must be reported on her tax return. Books and other course materials, including a required computer, are also QEE and can reduce that amount.

Q. Why is that number in box 6?

A. You'll have to ask the school that.  It usually only affects the prior year tax return.**

* Scholarship income is a hybrid between earned and unearned income. It is earned income for purposes of the $13,850 filing requirement and the dependent standard deduction calculation (earned income + $400).  It is not earned income for the kiddie tax and other purposes (e.g. EIC).  For grad students and post grad fellows, scholarship, stipend and fellowship income is earned income ("compensation") for IRA contributions

** Box 6 of IRS Form 1098-T reports adjustments made to scholarships or grants reported on a prior year Form 1098-T that was in BOX 5.  The amount reported in BOX 6 represents a reduction in scholarships or grants reported for a prior calendar year.  The amount reported in BOX 6 for adjustments to scholarships or grants may affect the amount of the education credit you may claim for the prior year.  See IRS Form 8863 for how to report these amounts.

[lyds0404]

Thank you. 

She did have a scholarship at her old school for towards her dorm (though it was only 2k a semester), she did not have that at her new school. She did not get anything towards the meal plan at either school. But tuition cost alone at the old school was 36k a year (so 18k in 2023 for one semester), and the new school is 29k a year (14, 500 a semester).  I don't actually think her 1098T from her old school is accurate at all. And I am not sure how to deal with or fix that. The only thing that makes sense is if the 19k in box 6 is accounting for the fact she's not there this fall or something, because that is the tuition cost for one semester.  And they kept trying to bill me for fall 2023 even though she wasn't registered and wasn't there and that was a whole process on it's own to clear up. 

It does not make sense she should have to claim that as income when it was towards tuition, so again, I think the school made an error. 

[Hal_Al]

Her 1098-Ts are saying that she has taxable scholarship! 

But, the 1098-T is only an informational document. The numbers on it are not required to be entered onto your or your student's tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit and/or possibly your student has taxable scholarship income. 

If you claim the tuition credit, you do need to report that you got one or that you qualify for an exception (the TurboTax interview will handle this)

You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid. You will also reach a screen that allows you to adjust the scholarship amount for "amounts not awarded for 2023 expenses".

Or if you find it easier, just change the numbers in boxes 1& 5 to what your records show. The 1098-T that you enter in TT is not sent to the IRS.

[lyds0404]

Update:

So the school included on the 1098T fall semester, even though she was not a student there. And then apparently Box 6 is removing the scholarships from fall 2023 as an adjustment somehow? Basically the whole thing is completely wrong. I have the bills from the school for the spring of 2023 showing what we paid and what scholarships she had and what they were for. Will save those just in case, but for now just leaving that one off since it is not taxable (only 1250 was for dorm room, zero for meals, rest for tuition) and using her current school for fall 2023 she qualifies.

What a ridiculous error on their part.

Thanks for the help.