VA GI BILL book stipend

[alimidaty]

For purposes of the AOTC, does the 9/11 GI bill book stipend of $1000 annually count as an additional grant/scholarship?  We have the 1098 T which shows the tuition paid in 2023 and GI Bill payment in box 4 that is less than tuition total in box 1.  We also have $810 in fees for books/supplies for classes.  Any guidance would be appreciated as I have not yet seen information for GI Bill book stipends that are not listed on 1098 T form.

[AmyC]

Sort of. The GI book stipend is not taxable and not considered a scholarship but it does count against your out of pocket expenses to reduce your AOTC credit.

 About Publication 970, Tax Benefits for Education states: Example.

You have returned to college and are receiving two education benefits under the latest GI Bill: (1) a $1,534 monthly basic housing allowance (BHA) that is directly deposited to your checking account, and (2) $3,840 paid directly to your college for tuition. Neither of these benefits is taxable and you don't report them on your tax return. You also want to claim an American opportunity credit on your return. Your total tuition charges are $5,000. To figure the amount of credit, you must first subtract the $3,840 from your qualified education expenses because this payment under the GI Bill was required to be used for education expenses. You don't subtract any amount of the BHA because it was paid to you and its use wasn't restricted.

[alimidaty · Accepted solution]

So if I understand you correctly I do not count the housing allowance for AOTC but I would put the one thousand dollar annual book stipend under other grants not listed on 1098T, is that correct?

[Hal_Al · Accepted solution]

Q.  I would put the one thousand dollar annual book stipend under other grants not listed on 1098T, is that correct?

A. Yes. But, more accurately, enter under veteran's benefits.  Either way, it gets treated the same. It's tax free assistance, reducing the amount eligible for the AOTC. 

[larockman]

What makes you believe that this reduces the books portion on the AOTC? The Ch 33 books stipend is paid directly to the individual, it is not required to be used for books. They give the amount regardless if you have any book expenses or not. (Sort of like the BAH). The one difference is that it is "earmarked" for books, supplies, etc but if you have no book fees, you don't have to pay it back, you can use it to buy a dog if you wanted. I can't seem to find any strong evidence that this isn't treated like the BAH. Also, it should be noted I searched Tax Court. Only thing I could find was Lara v Commissioner IRS.