Scholarship Money Counting As Income

[wjbrackins]

22 year old son, full time student, qualified dependent. 1098-T shows amount paid (all qualified expenses) as 2X amount of scholarship money, yet after answering all TurboTax questions about whether payments were qualified, being told scholarship money is income he has to count & it's not counting what we paid as a credit.

Same process for 19 year old daughter, yet received credit and NOT being told scholarship money is income she has to file.

Am I missing something?

[Hal_Al]

What are the amounts in boxes 1 & 5?  Even with 2X expenses, scholarships can be taxable, after claiming the credit.

If all else fails, delete education and staart over.  A recent software update has corrected some ed probs.

[wjbrackins]

22,523 paid, 11,415 scholarship.

Deleted him, re-entered as not receiving 1098 and entered expenses manually...still not showing as a credit. Is it his age? Seems like when I went that route yesterday, I received the credit. Maybe signing-out and re-doing (the old re-boot method) is needed.

[Hal_Al]

Those numbers should allow you to claim the credit and none of the grants are taxable, to him.

"Is it his age? "

Probably not. Age 24 is a turning point for being a dependent (rule change, not an automatic disqualification).  But once he is your dependent, the education interview is the same.

Make sure you have the latest update. Education change was included in yesterday's update.  Yes, deleting education and starting over may be the solution.

[wjbrackins]

Okay. I'm working with TurboTax Online. How do I ensure I have the latest update when working with Online edition?

[Hal_Al]

You don't have to do anything, it's automatic.

It's all updated automatically from their servers, but, there's no date or time stamp that customers can see.  

[jt040900]

I am having the same issue. Have twins 22yrs old and amending my 2018 tax return both had box 1 around $11k with $3300 scholarships. They both are in 5th year and seniors. We have claimed the AOC credit for four years.  I am not getting any education credits at all.  My joint AGI is under 160k.  Just tells me that no deductions are available. 

[Hal_Al]

@jt040900 - That is correct, the other two benefits (Lifetime Leaning Credit [LLC] and Tuition and Fees deduction [TFD]) are not available at your income limit. That is, the AOC has a higher income limit than the LLC & TFD.

[jt040900]

Thanks for your reply. I didn't know there was a max income for the TFD deduction. I am aware of the AOC Lifetime limitations. Do you know what the income level that keeps me from the getting TFD. 

[jt040900]

Since my AGI is below 160k i thought i would qualify because this is what I am reading now. $2,000 maximum for income over $65,000 and up to $80,000 ($130,000 and up to160,000 for joint filers)

[Hal_Al]

You are correct; unlike the income level  phase out with most tax breaks, the TFD is a direct cut off. Even with $159,999 of income, you get the full $2000 deduction. 

But the income is based on MODIFIED Adjusted Gross Income (MAGI). See https://smartasset.com/taxes/what-is-modified-adjusted-gross-income

[jt040900]

Thanks once again. Everywhere I look doesn't give a detailed way of finding /calculating my MAGI.  Do you have a link or info that could help me here?  Thanks once again. 

[KrisD15]

MAGI calculation

To calculate your modified adjusted gross income, take your AGI (line 7 on 1040) and add back certain deductions. Many of these deductions are rare, so it's possible your AGI and MAGI can be identical. According to the IRS, your MAGI is your AGI with the addition of the following deductions, if applicable:

Student loan interest

One-half of self-employment tax

Qualified tuition expenses

Tuition and fees deduction

Passive loss or passive income

IRA contributions, taxable social security payments

The exclusion for income from U.S. savings bonds

Foreign earned income exclusion

Foreign housing exclusion or deduction

The exclusion under 137 for adoption expenses

Rental losses

Any overall loss from a publicly traded partnership

[jt040900]

Its telling me i don't qualify because scholarships/grants/and other tax free assistance exceeds the education expenses.  Both boys had aroudn 11k on box one and 3k in scholarships in box 5. I just don't understand!

[KurtL1]

There is a possibility that there is residual information on the 1098-T forms from your previous entries. You should delete the forms then clear your cache and cookies. [Hold down the Cntrl, Shift, and Delete keys at the same time]

You should enter the 1098-T's back into the software and you should not receive these error messages.