Taxable scholarships, Form 1098-T, and educational credits

[catkik]

So for the taxable scholarships, I took the total scholarships (basically off her 1098-T) minus qualified education expenses (also off 1098-T - tuition, fees) + about 2000 (the difference between AOTC of 4000 that we claimed on our taxes and our qualified educ expenses of 2000 - computer and books, that we paid). 

Here is my formula 

Total Scholarships for 2023 - total qualified education exp+ AOTC (max) - outofpocket qual.ed.exp.

$22129-11250+ 4000-1913=12966

So you are saying since she is reporting this taxable scholarships as income, we should not be doing any deductions and credits? if you could explain, why, I'd appreciate it. 

Of course, it makes her return a lot easier. I just need to understand why. 

Right now, I've gone through the whole deductions interview and even entered the scholarships that are designated for 2024 expenses (which is about half). 

Are you saying that all of this is not necessary? 

Thank you so much!

[catkik]

So for the taxable scholarships, I took the total scholarships (basically off her 1098-T) minus qualified education expenses (also off 1098-T - tuition, fees) + about 2000 (the difference between AOTC of 4000 that we claimed on our taxes and our qualified educ expenses of 2000 - computer and books, that we paid). 

Here is my formula 

Total Scholarships for 2023 - total qualified education exp+ AOTC (max) - outofpocket qual.ed.exp.

$22129-11250+ 4000-1913=12966

So you are saying since she is reporting this taxable scholarships as income, we should not be doing any deductions and credits? if you could explain, why, I'd appreciate it. 

Of course, it makes her return a lot easier. I just need to understand why. 

Right now, I've gone through the whole deductions interview and even entered the scholarships that are designated for 2024 expenses (which is about half). 

Are you saying that all of this is not necessary? 

Thank you so much!

[AmyC]

If you want to claim the education credit, we start with education costs then the left over is scholarship income to the student. So $4k to you leaves $7250 plus all your other qualified expenses equals the remaining qualified education expenses available to be paid by scholarship. Subtract that from the scholarship for the taxable income.

1. If you qualify for the AOTC, $4k will maximize it for you. What education tax credits are available? 

2. You do want to claim credits, they are much more valuable than a few dollars of taxable income to the student.

Don't forget, scholarship income brings the kiddie tax into consideration. See What is the Kiddie Tax?

[Hal_Al]

Q. So you are saying since she is reporting this taxable scholarships as income, we should not be entering any deductions and credits (expenses) on her return?

A. Yes.

Q.  Could you explain, why?

A.  Because you effectively already  enter all her expenses when you manually calculated the amount of taxable income ($22129-11250+ 4000-1913=12966) and entered it in the income section.  You don't claim the education credit, on her return, because you claimed it on yours.  You should enter nothing in the education expenses and scholarships section, on her return.

Entering the taxable scholarship in the income section was an alternate method you managed to find. TurboTax coulda woulda shoulda done that in the education expenses section. 

[catkik]

Thank you very much! I will proceed!