1. Credits go to the parents, income to the students.
2. You might both end up reporting the 1098-T. Parents for credit, student for income.
This can go two directions:
1. The IRS has a great brochure that explains how scholarships and tax credits interact. You may be able to claim education credit, if you qualify, despite not paying anything. You would claim up to $4,000 tuition paid for a large credit on your return while she pays a little extra tax on hers.
2. If you don't qualify for a credit, it all goes on her tax return.
What You Need to Know about AOTC and LLC states:
- You receive a reduced amount of the credit if your MAGI is over $80,000 but less than $90,000 (over $160,000 but less than $180,000 for married filing jointly).
- You cannot claim the credit if your MAGI is over $90,000 ($180,000 for joint filers)
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