More simply put:
The below assumes that your daughter was paid by the school, the excess scholarship money so that she could spend it any way she liked. If the school did not refund the excess scholarship to your daughter, then let me know, as things will be handled in a completely different manner then.
- What you the parent spent on your daughter's education does not matter. It doesn't count since scholarships exceed the total of all qualified education expenses.
- You will still claim your daughter as a dependent on your tax return. You will not report one penny of education stuff on your tax return.
- Your daughter will report the 1098-T on her own tax return (weather she likes it or not) along with any other qualified education expenses paid that are not included in box 1. (It doesn't matter who paid those expenses either.).
-Your daughter (not you) will pay taxes on the excess scholarship money not used for qualified education expenses. (She has no say or choice in this matter either.)
- Your daughter will be taxed on the excess scholarship money at the parent's higher tax rate. So you can expect your daughter to be contacting you for your tax information. She is required by law to include it on her tax return, to show how the tax rate was determined for the excess scholarship.
