Form 1098T, Education Tax Credit and Dependency Determination
Hello. I have some questions regarding Form 1098-T and student dependency. I apologize in advance for my lengthy post as I was trying to provide sufficient background. Our son is a full-time student (under 24) who received a 1098-T for 2025: Box 1-Qualified Tuition $70k; Box 5-Scholarships $100k thus $30k in taxable scholarship. The scholarship fully covered his tuition and room and board (about $18k-$20k) plus some living expenses. He also received W-2 (wages), 1099-Misc (stipend/fellowship) and a small 1099-NEC (freelance).
1-Can we still claim our son as a dependent in 2025 based on above? A question under the "personal info" in Turbo Tax (“TT”) for student asks “Did you provide over half of your own “support” with “earned income” during the year?” How are we supposed to answer that? Wages are “earned income”, but what about 1099-misc income and scholarships that are NOT reported on W-2? What is exactly considered “support”? His majority of expenses for the year were for 2 semesters of tuition and room and board which were fully covered by his scholarship. We also paid for some of his living expenses. Is there a certain $ threshold for “earned income” and “support” to determine whether a child is considered dependent or not?
2-If student is a dependent, TT Forum always advises to do the following for entering 1098T numbers in TT. Input $4k in Box 1 (tuition) and 0 in Box 5 (scholarships) on parents’ return in order to take advantage of the full education tax credit of $2,500 and for the students to include an additional $4k of scholarship monies on their returns. If we claim him as our dependent, can we choose to use a lower tuition number in Box 1 (i.e. $2k) instead of the maximum allowable amount of $4k? If so, our son also needs to report the same amount (i.e. $2k) as additional scholarship on Sch 1, line 8r (total scholarship: $32k=$30k+$2k), correct?
3-If he is not considered a dependent for 2025, how do we change the information in TT for both the parents and the student to reflect that? In Parents’ TT: Do we “delete” the input tab for him as a dependent in our TT or do we keep that tab and in later screens choose that “he lived with us for whole year” and “he paid for more than half of his living expenses” to trigger he is NOT a dependent? In Student’s TT: I tried to change the “dependency” selection by doing the following in his TT so he is NOT a dependent. Under the “personal info” tab I did NOT select “Another taxpayer can claim you on their tax return” and instead selected “none of the above”. Then a few questions later, I selected “yes, I (i.e. my son) provided over half of my support with earned income”. I then entered Form 1098T information in my son’s TT (Box 1-$70k and Box 5-$100k). TT showed the $30k as scholarship on his Sch 1, line 8r, but it did Not generate any AOTC for him and a message appeared after the Form 1098T was entered that “my son does not qualify for education tax credit because: somebody else can claim him as a dependent on their return and there were no net qualified education expenses.” This statement doesn’t make any sense to me when I specifically had selected that nobody else was going to select him as a dependent. It appears to me if he files his return as a “not dependent”, he cannot take advantage of any education tax credits. So how can a student who is NOT a dependent take advantage of a full/partial education tax credit on his return?
Thank you in advance for your time and insight.
