AOTC help needed to verify I am doing this right please

[MidMoMom24]

@Hal_Al 
Hello, 
If possible could you please give your input if I have done this correctly to claim the AOTC? 

I am trying to claim the AOTC credit for my student that is in their second year of college. 
Our 1098 T info:
BOX 1: $37,019.95 
BOX 5: $44,085.00

Student at least half time: X
[The rest of the blanks on the form are empty.]

QEE (books): $128
Room & Board amounts for the 2024: $9,806
Scholarship Amount restricted to Tuition ONLY: $34,650

Can we allocate $9,435 of his scholarship money (the difference left after deducting the tuition only scholarship) to his room & board and claim that for my students income? (They earned $2,400 over summer with an on campus job, they received a W2 for this job and that was their only income - so even with the $9,435 that's not enough for them to be required to file their taxes, correct?)

This gives me the following: 
Education Credit $1,275 

Refundable American Opportunity Credit $850

For a total of $2,125

Does this look correct? Or do I need to do something differently? 
Thank you in advance.

[Hal_Al · Accepted solution]

Q. Does this look correct? 

A. Yes, you got it exactly right. 

Q. They earned $2,400 over summer with an on campus job, they received a W2 for this job and that was their only income - so even with the $9,435 that's not enough for them to be required to file their taxes, correct?

A. Correct. That totals less than $14,600, so their standard deduction* will cover the total income. You may want to have them file anyway just to document the reporting of the scholarship as income. 

For others reading this: even if his actual room & board had been less than $9,435, he could still claim that much as taxable scholarship to allow the parents to maximize the AOTC. Note the wording at that screen “or other expenses”. You didn’t have to literally use the scholarship for R&B.  

*Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $14,600 filing requirement (2024) and the dependent standard deduction calculation (earned income + $450).  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.  Taxable scholarship goes  on line 8r of Schedule 1 

[MidMoMom24]

@Hal_Al 

Thank you so much! You were so helpful last year (I took 6 pages of notes from your advice last year, with great detail in hopes I would get it right this year) and I am confident that is the reason I did get it right 🙂 

I really appreciate you taking the time to go thru this for me. I will also go thru and do my students taxes and see how that goes. Should I submit even if there is no amount due or owed? Just to have a record of this amount as their income with the IRS? (Just making sure I followed you right).

Thanks again! 🙂

[Hal_Al]

 Q. Should I submit even if there is no amount due or owed? Just to have a record of this amount as their income with the IRS? 

A.  Yes, but it's optional.  There's not  evidence yet that it's actually helpful. I would do it if there is no cost involved (e.g. you don't have to pay another TurboTax fee to file). 

[MidMoMom24]

@Hal_Al 

Hello,
I am going thru turbo tax and trying to submit my students tax return for the IRS to have a record (based on what we discussed above) and realized they will be receiving a small refund ($72 from federal & $15 from state). I wanted to clarify when I enter the $9,435 as the amount they used to pay for R&B it puts their standard deduction as $12,285 - not the $14,600.  Does that sound right? 

They had $2,400 income from summer job that they received a W2 for, plus the $9,435 we allocated from scholarship funds (so that total is $11,835)

[It gives this small summary in regards to how they calculated the standard deduction]

Your total income for the year was $11,835, including: - Wages, $2,400 - Other income, $9,435 You took the Standard Deduction of $12,285. After applying your deduction, your taxable income was $0. Based on this, your total tax before any credits was $0. You did not qualify for any tax credits.

Also, it is asking for me to "review a section" (that was never presented before now) while finishing up and it pops up and says:
Form 8615: Parents last name must be entered: (then a blank box) so I fill my info, 

then another box appears that says "Parents SSN" (I answer my ssn)

then another box appears that says "Parent's marital status" and it has a section to check a box.

then another box appears that says "Parents first name" (I fill it in) then the whole section disappears and I am not able to find this information again. I am not exactly sure if I have done something wrong or if this is really needed to file my students taxes.
Can you please advise if this sounds right or if I have done something wrong and this form is not needed?
(I did lookup this form and there seems to be several more questions in regards to our income, etc. that were never asked via Turbo Tax. So I am curious if its ok to submit it like this with just these 4 questions answered? 

Thanks again.

[Hal_Al]

Q. It puts their standard deduction as $12,285 - not the $14,600.  Does that sound right? 

A. Yes. Dependents don't get a straight $14,600 SD.  Instead, their SD is their earned income plus $450, but not more than $14,600. It still means their earned income does not get taxed, as you can see.  $11835 + 450 = 12285.

Q. Can you please advise if this (form 8615) sounds right or if I have done something wrong and this form is not needed?

A.  Yes, all is good. TurboTax (TT) always prepares form 8615, in this situation (dependent has taxable scholarship). 

Q. So I am curious if its ok to submit it like this with just these 4 questions answered?

. A. Yes. That was enough to complete Part I of form 8615.  At the end of Part I, TT concludes Part II is not required and doesn't need the other info.  See the wording line 5 on form 8615.