The terms of the scholarship or grant must allow it to be used for expenses other than qualified education expenses to use this potential tax-saving technique.
To make some of the scholarship taxable on your return so you can maximize the American Opportunity Credit, select Edit next to Scholarships/Grants in the Education Summary screen. Answer Yes to Did you pay room and board with a scholarship or grant? and enter up to the amount that will maximize the credit or the amount that you spent on non-qualified education expenses:
- Room and board.
- Travel.
- Research.
- Clerical help.
- Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution.
This will enable you to maximize the American Opportunity Credit. That portion of the scholarship will correctly become taxable on line 1 of Form 1040.
@CalixBarrus
