Scholarship exceed tuition but less than $6100, form 1098-T. Can I claim my son as dependent?, who claim education expenses? Does he need to file a return?

[jefmelch]

I have a very similar situation with my daughter and find the digressions as useful as the original topic.  The TurboTax Premier step by step summary implies daughter's income of only $4000, standard deduction of $6300, some small withdrawals from 529 not even shown,  yet tax liability of nearly $1000 -- because 1098-T scholarship "income" is hidden.   Some of the Q&A in this site instruct that the 1098-T data always and only be entered on Parent's return, not dependent's.  This expert instructs otherwise.  Also other pages instruct to transcribe 1098T data as shown, "even if wrong" to be corrected "later".  I'm having a lot of trouble finding and working with the TurboTax screens in these circumstances.   In short the digressions show me I'm not alone, or being stupid, with this issue.

[ChristinaS]

The scholarship income goes on the child's return (output). The education credit goes on parent (output). Entry of the 1098-T (an input) is merely a vehicle to tax treatment.  The 1098-T itself is just an input to produce an output.

[ChristinaS]

The IRS doesn't see a 1098-T form on your return- just the results. If your child has a taxable scholarship, you enter that in the Education section of their return. You can enter as a 1098-T or just enter the scholarship. Both lead to the same thing.

[jefmelch]

Clear as mud!   The "education" section of the actual IRS tax forms don't directly relate to the "step by step" process in TurboTax Deluxe.    The "step by step" process assigns "education" as part of "deductions and credits".  Which is the more common case, I admit.  But when scholarships support non-qualified expenses like room and board, there is "income" -- that doesn't show up in the "wages and income" summary.

[MarylandRetriever]

One confusion is that in certain circumstances, even though the children/dependents may have to "file" their "own return," this can be entered on the parent/guardian's return using Form 8814. So, although the child "files" own return, it is done in the parents' return. So, my child did file a return, but in our return on Form 8814.

A second confusion is that TurboTax says you must put the information from the 1098-T in the return even though it is not actually required by the program nor the IRS (thanks for TurboTaxChristinaS for explaining that detail). This seems like something the company might want to address in their explanations.

A third confusion is in the problematic tax law. A student who uses the scholarship to pay for housing (often required by the college at least for 1st year students; and, in practice required for anyone who does not live in the college's town) and food (gotta live). So, where does the student find the "left over" funds to pay the tax bill on the scholarship? -- the tax law should address this issue by including room and board as acceptable expenses and/or make scholarships un-taxed.

[jefmelch]

We _are_ digressing!  The original question identifies her son/dependent/student without other taxable income.  The 8814 applies if no wages, no withholdings,  _AND_ "gross" less than $10,500.  I'm not at all clear if the scholarship for room and board adds to the "gross".  

My current worry is that with my daughter's $4000 of at-schoolwages and summer job (out of state, to boot.) stipends added to imputed-income of room and board (which total rules out the 8814 option)  the line regarding "more than half of her support" may also get crossed and she would no longer qualify as my dependent.  (This circles back to the original question  part (3) "can I claim him as a dependent?" )

This is a combined parent/dependent issue and I don't see how to get the TurboTax software to help me address the combined money flows.  It seems I have to do a bunch of worksheets and decision-making before I even click on the menu to "Open New Tax Return" for my 19 year old.

[maglib]

Aren't students who are dependents required to file if over $4,050 ?