I am helping my son with his taxes. He is claimed as our dependent and has a disability. He is a full time college student. He received a 1098-T from his college listing his vocational rehab money on line 5. He is not a veteran. Turbo Tax is wanting to tax him on his vocational rehab money for tuition and fees. The only way that I can see to deduct this is if he were a veteran. Are these funds meant to be taxed? Is there a way to deduct them? It makes the difference in owing taxes or receiving a refund.
To clarify, is this administered through the U.S, Department of Veterans Affairs?
I see you say the student is not a veteran, but is he a child of a veteran?
This link is the only information I could find on anything called "Vocational Rehab"
I suggest you contact whomever supplies that assistance and ask them if it is reported on a tax return.
TurboTax (TT) automatically treats the difference between box 5 and box 1, of the 1098-T as taxable, if the box 5 amount is larger than box 1.
Another possibility is that TT is assuming the parents are using some of the box 1 tuition to claim an education credit. This would reduce the amount of tuition allocable to the tax free scholarship (vocational rehab money).
More info is needed.
This is not administered through the Department of Veterans Affairs. It is administered through the Department of Elementary and Secondary Education (DESE). He is not a descendent of a veteran.
I have emailed DESE and haven't received a reply from them.
Box 5 is smaller than Box 1 by around $1,100.
As parents, we did use his 1098T when filling out our taxes with Turbo Tax. We did get a American Opportunity credit for our two students that are in college. It is difficult to say if it was for this student or the other student, who we have to pay for tuition for.
Q. "As parents, we did use his 1098T when filling out our taxes with Turbo Tax. We did get a American Opportunity credit (AOTC) for our two students that are in college. It is difficult to say if it was for this student or the other student, who we have to pay for tuition for."
A. If you entered both of their 1098-Ts, you got the credit for both of them. Review form 8863, for details. If you used the maximum $4000 of tuition to claim the credit, for him, then $2900 (4000 - 1100 = 2900) of his grant would be taxable to him.
If the conditions of the DESE grant specify that the money can only be used for tuition, then you are not allowed to reallocate $2900 of tuition from the grant to the AOTC. You would have to recalculate your AOTC based only on $1100, but then none of the grant would be taxable on his return.
In his interview, in the educational expenses section, you should reach a screen called "Amount used to calculate education credit". Verify the amount you want to use or change it.
To get back to that screen, Go through the entire education interview until you reach a screen titled "Your Education Expenses Summary". Click edit next to the student's name. That should take you to a screen “Here’s your Education Summary”. Click edit next to “Education Information”. When you get to the screen titled “Amount Used to Calculate Education Credit”, verify the amount you want to use or change it.