thanks for finding that.... I searched the 970 the first time and did not see that exception that deep in the examples. it was called out clearly under the learning credit.
there are limitations.... the way I read it
- the amount of the scholarship to be moved to income can't cause qualified tuition plus related fees minus the remaining scholarship to exceed $4000. (which becomes important with a 529 interplay)
- the scholarship itself must permit the use of the dollars to cover expenses outside qualified tuition plus related fees (e.g. Room and Board). If the scholarship terms require the money only to be used on tuition plus related fees, you can't do it.
example:
Box 1 = $5000
Box 5 = $7000 - two scholarships one of which is $4000 and is limited to qualified tuition and related fees. (I don't know how frequently scholarships limit their use to qualified or non-qualified expenses)
Student's income is $2000 (from the net of Box 1 and Box 5). Student and Parent want to increase the scholarship income by $6000 so that Box 5 becomes $1000, and the net is $4000 which is the maximum benefit for AOTC.
However, that is not permitted because one of the scholarships ($4000) is to be used exclusively for tuition and related fees. The best the student can do is move $3000 into income and reduce Box 5 by a similar amount to $4000
Box 1 remains at $5000 and Box 5 is $4000, leaving $1000 available for AOTC.
Box 5 can't be any less than $4000 because one scholarship can only be used for tuition and related fees.
thoughts?
