So we will end up claiming the difference of $15K or whatever on her OWN taxes, right?
You misworded that. "we" should be "she". But yes, the student will report "all" of the education stuff on their own tax return. The student will still select the option for "I can be claimed on someone else's return" and the parent will still claim the student as a dependent on the parent's return.
Now for the student when they report this on their return, the taxes they will pay only on the excess scholarships/grants will be at the "higher" parent's tax rate. So don't be surprised if the student asks you for your personal income information. They are required by law to provide it, for the purpose of determining the tax rate the excess scholarships will be taxed at. Since the excess scholarship money plus her earned income exceed $12,350 she is required to file a tax return.
Keep in mind that the 1098-T is not always inclusive. If there are scholarships that were awarded in 2019 that are not include on the 1098-T, then that will increase the student's taxable income. Likewise, if there are qualified education expenses (such as books, which is common) not included in box 1, that will decrease the amount of taxable scholarship money. If those expenses not included in box 1 are actually enough to exceed the total of all scholarships received, then guess what? The parent reports the education stuff on the parent's return!
Another thing too, is that if the student was not paid the excess scholarship directly by the school, that would mean the school is holding the excess to "apply" it to 2020 qualified expenses. If that's the case, then the student needs to indicate that on their tax return so that the excess they did not physically receive will not be taxed on their 2019 tax return. Someone also needs to keep track of the "exact" amount held over by the school, because someone (you or the student) will have to report that amount on the 2020 return when that gets done next year.
Finally, do understand that neither you or the student will get "any" education credits for 2019 if in fact, all qualified education expenses were 100% covered by scholarships/grants.
