College and Grad School 1098-Ts

[brian-aguilera]

Hi, this one might be a difficult question to answer, but I don't know what to do and need help with my situation. So last year I was a college student for the first semester for which my parents completely supported me financially and paid for tuition and other expenses. I received a 1098-T for this with a tax-free scholarship included and had an on campus job where I made about $1200. With this I could be claimed as a dependent and my parents would get the tax deductions from paying for my education (Which is what we did last year). Then for the second semester I started Graduate School for my PhD where I get paid and received another 1098-T with a taxable scholarship as it is way higher than my educational expenses which completely supported me financially with no support from my parents. My parents want to claim me as their dependent and file my 1098-Ts however I am confused because if I sum them both up it would amount to more than the educational expenses and I think I have to pay taxes over them. My question is about who should file my 1098-Ts, whether or not I qualify as a dependent and if for example my parents could file one of my 1098-Ts and I could file the other so they get the tax break for supporting me for the first semester and I still pay the taxes over the other one. Thanks in advance if you could help me out with this.

[JotikaT2]

It depends.

They can claim you as a dependent if:

• You are related to them
• You aren't claimed by someone else
• You're a US citizen, resident alien, national, or Canadian or Mexican resident
• You aren't filing a joint return with a spouse
• You're under 19 or 24 years old if you are a full time student
• You live with them for over half of the year (except for temporary absences for college)
• You didn't provide more than half of your own support

If you don't meet any of the items above, your parents would not be able to claim you as a dependent.

You would have a filing requirement if you make more than the following amounts in gross income: 

• $12,200 for Single 
• $24,400 for Married Filing Jointly 
• $5 for Married Filing Separately 
• $18,350 for Head Of Household 
• $24,400 for Qualifying widower 

I have included some additional information to help you determine if you have any filing requirements based upon your specific filing status. 

Do I need to file a return 

Gross income amount for dependents 

[Hal_Al]

You don't say what your age is. If you were under 24, on 12-31-19, you parents can claim you as a dependent. The reason is that scholarships, even taxable scholarships are considered as third party support and not as support provided by the qualifying child*.

 So, they will file your 1098-Ts.  Actually the 1098-T does not "get filed".  So, more correctly, your parents will claim the tuition credit and you will claim the taxable scholarships.  You cannot claim a tuition credit or deduction for either the grad or undergrad work, because you can be a dependent.

If they claim the American Opportunity Credit (AOC), they can only claim the under grad tuition. There is a 4 time limit on the AOC, which they may have already claimed in the past.  If they claim the Lifetime Learning Credit (LLC), they may count both grad & undergrad tuition (to the extent that it wasn't covered by tax free scholarship). 

*A child of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:

1. He is under age 19, or under 24 if a full time student for at least 5 months of the year, or is totally & permanently disabled
2. He did not provide more than 1/2 his own support. Scholarships are considered third party support and not as support provided by the student.
3. He lived with the parent (including temporary absences such as away at school) for more than half the year

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.

You cannot file ei whether or not I qualify as a dependent and if for example my parents could file one of my 1098-Ts and I could file the other so they get the tax break for supporting me for the first semester and I still pay the taxes over the other one. Thanks in advance if

[brian-aguilera]

Hi thank you for your answer. Yes I am currently 22 so I can still qualify and I was full-time all year and considering what you said I did not provide 1/2 of my own support since it was mostly through scholarships. Now, I know I have to pay taxes for my second 1098-T since the fellowship I'm on covers way more than just the tuition. On the second 1098-T box 5 is $51,126 and on box 1 is only $20,842 however, in the first 1098-T box 5 is only $1,057 and box 1 is $14,842. Now if I don't include them on my Turbotax return it says I don't have to pay any taxes because it only has my W-2 which was only for $1,200 I received from my on-campus job. Now since my parents will include the 1098-T in their taxes then would they be the ones that would have to pay for the taxes on my second 1098-T and would they still qualify for any of the deductions you mentioned.

[Hal_Al]

Based on those numbers, it's real simple.  Your parents enter only the first 1098-T (undergrad) on their tax return and claim a full tuition credit.  There's a enough in box 1 that they can claim the maximum LLC, even if they are no longer eligible for the AOC.

You enter  only the 2nd 1098-T on your return and pay tax on $30,284 (51,126-20,842) of scholarship income (unless you can reduce it by books and other course materials not already in box 1).  Your parents should not (and  are not allowed to) report that income on their return.

You can not use any of the box 1 amount on the undergrad 1098-T to reduce the tax on the grad scholarship.