Q. Please elaborate on the following quote:
"You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses."
A. The main point is that you may not shift scholarship money if the terms of the grant are that it be used for tuition. The billing statement comment was meant only as a possible indication of what the terms might be. The billing statement does not govern, only the actual terms of the scholarship.
Q. A student's university scholarship seems to be listed as either consuming all tuition and part of room and board (or vice versa). Do you feel I'd be able to use the strategy in this case for the portion of the scholarship allocated to tuition?
A. That's not clear. But, no, if the conditions of the scholarship are that a certain amount must go to tuition.
Q. If so, would the way I input scholarship money I received for nonqualified expenses on my tax forms change?
A. None of that is done on the actual tax forms. It occurs in the TurboTax (TT) interview.
Q. Or would I only increase my taxable income by the amount necessary to reach $4,000 in qualified expenditures and leave everything else unchanged?
A. In the TT interview, you will be asked how much of the scholarship went for room & board. That's how you shift the scholarship to nonqualified expenses.
If you are the parent, you have to make the adjustment on both your return (to re-allocate expenses to the tuition credit) and the student's return (to report the scholarship income).
