To maximize the American Opportunity Credit, I am reporting more of my scholarships/grants as income in order to claim qualified expenses of up to $4000 (which is a recommended method by the IRS on p. 16 of the 2017 Tax Benefits
for Education and also happens to significantly increase my federal return). However, on my state return, it is more beneficial to report my scholarships/grants normally and not as income.
Essentially, this means that on my federal return I will be reporting more gross/taxable income (from scholarships/grants) than on my state return. Can I have this discrepancy in gross/taxable income as long as both returns are accurate? Both reporting methods are fine and legal, but I just want to know if I can use one method on my federal and a different method on my state to maximize both returns. I am aware that I will have to e-file my federal and then paper mail my state if I am allowed to do this.
