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You do not report the excess of scholarships over tuition on your tax return.
Your daughter has to report the scholarship on her own tax return. She will indicate that she can be claimed as a dependent by someone else.
Please also read the excellent answer by Champ Hal_Al in this Community thread on claiming the American Opportunity credit.
Simple answer: you don't enter it anywhere. But, taxes aren't simple. If that is her only income, she does not need to report it, because it is below the filing threshold of $12,550*. If it does need to be reported, it goes on her tax return, not yours.
If she does need to enter it, it gets entered in the educational expenses section, of TurboTax (TT), not in the income section. Basically, TT sees the $4000 difference between box 5 and box 1 and treats it as taxable. Entering book and computer expenses can reduce the taxable portion.
*You do not report his/her income on your return. If it has to be reported, at all, it goes on his own return. If your dependent child is under age 19 (or under 24 if a full time student), he or she must file a tax return for 2021 if he had any of the following:
__________________________________________________________________________________
There is a tax “loop hole” available. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), 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 an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.
Books and computers are also qualifying expenses for the AOC. So, extending the example, the student had another $1000 in expenses for those course materials, paid out of pocket, she would only need to report $5000 of taxable scholarship income, instead of $6000.
Thank you so much for your help
Thank you for replying.
There is a question asking if she pays more th a half of her expenses? Her scholarship is 14k and tuition is 10k. She used the other 4knfir boarding and I have to pay another 10k. In order to answer yes to the paying more tha. Half of her expenses? Does she need to make 12k in w2 or less or more?
I noticed that when I answer that she pays more tha. Half of her expense. She is partially dependent on my return ans my refund was over 4k. When I said no that she didnt pay for galfbof her expenses. She becomes my dependent amd my refund came down to 500. Would it be better if she works and how much should she work? Thank you
@divanailsalonsr- said "I noticed that when I answer that she pays more than Half of her expense. She is partially dependent on my return and my refund was over 4k. When I said no that she didnt pay for half of her expenses. She becomes my dependent and my refund came down to 500."
Sorry, that doesn't make sense. You must be doing something wrong.
As to the question " In order to answer yes to the paying more than Half of her expenses? Does she need to make 12k in w2 or less or more? It's complicated. But, there's a simple answer: Just say no to the support question. Scholarship is not counted as support for the dependent support test. So unless she has a high paying job and/or large investment income, she did not pay more than half her own support.
There are two types of dependents, "Qualifying Children"(QC) and Other ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student status, a relationship test and residence test.
A child of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:
So, it doesn't matter how much he earned. What matters is how much he spent on support. Money he put into savings does not count as support he spent on him self.
The support value of the home, provided by the parent, is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants.
The IRS has a worksheet that can be used to help with the support calculation. See: http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf
Note that the requirement is not that you(the taxpayer) provided more than half his support. The requirement is only that the child did not provide more than half his own support.
Self support https://ttlc.intuit.com/community/taxes/discussion/re-i-m-not-sure-what-to-put-when-it-ask-did-i-sup...
Thank you Hal_Al
Maybe because I went back to ađd her 1098t. I forgot to enter it before . Let me go back and check on it again. Thank you much for answering my questions. I learn so much.
@Hal_Al how do you enter this loophole? I'm not understanding how to enter part of it as income so it becomes taxable. When I'm asked about room and board, is this where I enter the taxable amount of money I want to claim?
Thanks!
"How to" answered at your other post. https://ttlc.intuit.com/community/college-education/discussion/re-1098-t-scholarship-exceeds-tuition...
For higher tax refund and financial aid purpose. What age can a child can be a independent on tax return? Can she be a independent before 18 or while in high school? Is it better if she starts working to support more than half of her expenses starting first year of college or 12th grade? If she Getz 14k for financial aid and spent 10k om tuition and books. She has 4k as taxable income. Let say her dorm and food is another 5k. Does she need to make more tham half of 4k to say that she support more than half of her expenses? Thank you
Hi Hal AL
Thanks again for helping. I forgot to enter my daughter 1098t.when I efiled my federal tax. My refund was about 5k. I went back entered 1098t and refund was about 500. I saved the file a before realizing that there is a amend tax tab. So I went back and amend it. I forgot to save the file in a different location before trying to not claim her as a dependent and I saved it. Now I am so confused of what I did in the original turn which I efiled. Is there a way that I can get the copy of the original file which I sent to the irs in TurboTax software. I need to compare it to my amended file? Thank you
@divanailsalonsr- You're looking for a simple answer to a complex question. There isn't one.
Q. What age can a child can be an independent on tax return?
A. Simple answer: 19, if not a full time student. See full dependent rules at: https://turbotax.intuit.com/tax-tools/tax-tips/Family/Rules-for-Claiming-a-Dependent-on-Your-Tax-Ret...
Q. Is it better if she starts working to support more than half of her expenses starting first year of college or 12th grade?
A. Neither. It's highly unlikely someone under 19 would be self supporting or even a full time student under 24. The financial aid people are wary of young college students claiming independence.
Q. If she Gets 14k for financial aid* (scholarships/grants) and spent 10k om tuition and books. She has 4k as taxable income. Let say her dorm and food is another 5k. Does she need to make more than half of 4k to say that she support more than half of her expenses?
A. No. Scholarships and the expenses they pay are ignored in the dependent support calculation.
*Loans are treated differently from scholarships in the dependent support test. Co-signed loans are treated as parental support. Loans in the student's name only are self support.
You're gonna need TT support to straighten that out.
To contact TurboTax (TT) support:
https://turbotax.intuit.com/support/contact/index.jsp
In the search line enter some keywords or question without quotes. On the next page, skip the suggested topic links and scroll down until you see CALL US. It should show the wait times. Free support is not available to Free Edition users. You will have to upgrade to talk to a representative.
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Thank you
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