Im divorced. X wife claims 22 yr old daughter on taxes. Daughter was full time student at least half of last year. We set up a coverdale ESA for daughter while still married and I am now the custodian.
This year my daughter received her 1098T form from college ... to simplify the numbers in the example....she paid 25000 in tuition box 1 and had 5000 in scholarships in box 5 and nothing else on the form
questions
I requested at 12000 disbursement from the coverdale and recieved at 1099-Q form showing 12000 to me
1. i paid 12000 out of pocket and daughter took govt loans in her name for 8000 for college (25000 total tuition on 1098T -5000 scholarship -12000 from me= result of 8000 of payment by loans from govt to daughter in daughter name)
Now tax time..
2. I input the 12000 on my taxes as 1099-Q recipient and show 12000 in out of pocket I paid for tuition .. so my 1040 form now shows no taxes due as expected. I think this is correct.. Maybe I do no even have to enter the 1099Q or tuitions expenses on my form?? thoughts on this?
3. x wife claims american opp tax credit since she claims daughter as dependant. I make too much for amer opportunity so wife claims daughter as dependant even though x does not pay for college other than via the coverdale we set up when together to pay for it.
so now the math is -- total of 8000 remaining that is paid from loans of the 25000 in tuition on 1098T
-daughter cannot claim this as she is claimed as a dependant on x's tax form
x can claims 2500 american opporunity credit against her taxes as a result of 8000 paid by daughter via loans... 100% of first 2000 plus % of remaining 6000 in tuition cost.
Is this correct thinking?
In this case, the tax credit will be returned to daughter to pay off loans since she cannot claim her self but has the loans in her name. If x or we took out loans, this would be much more obvious as money paid out of pocket to apply for AOTC.
lastly, assuming all of the above is accurate.
In turbo tax how does x input values to make the AOTC math work
Does she input 1098T amount box 1 and box 5 in turbo tax and then put 12000 in other so that remaining total for AOTC is the 8000? She has no where to enter a 1099Q since it does not come in her name. I properly file that 1099Q in may name and reduce it by the 12000 our to pocket on my form as no taxable eductation payments on behalf of daughter
Any clarity appreciated.
