here is how it works:
1) the 1098T goes on YOUR tax return, so that you can maximize the aotc credit.
2) from your comments, i assume that Box 1 of the 1098T is $58,578 and that Box 5 is $60200
3) in order to take advantage of the maximum amount of the AOTC credit of $2500, you have to reduce Box 5 of Form 1098T to $54, 578. That will make the difference between Box 1 and Box 5 at exactly $4000.
4) That means Box 5 was reduced from $60,200 to $54,578 or $5,622. This is taxable income to your child (more later)
5) the 1099Q is associated with whomever's social security number is on the form.
6) your total expenses appear to be Form 1099T / box 1 of $58, 578, less box 5 of $54, 578, less the $4000 that was consumed to generate the $2500 tax credit. So now we are at zero.
7) you had additional expenses of $13,464 (room and board, etc) and you have a distribution from the 529 plan of $10,591 (box 1 form 1099Q) since the expenses EXCEED Box 1, there is no need to put this on your tax form (or your childs). Look closely at the instructions on the 1099Q and it states that you are to determine if anything is taxable and since you have determined that nothing is taxable, there is nothing to report (read it closely)
😎that leaves your child's tax return. Fill out the 1098T but only put $5,622 in box 5. that will create taxable earned income on Line 1 of the 1040 and it will be marked with 'SCH"
9) since the dependent's earned income is $4635 plus the $5622 is less than the standard deduction of $10,607, there should be NO income tax due, In fact, if there were no withholdings on the $4635, there is no requirement to even file a tax return.
please read this slowly, it will work, but this whole area of 1098T, 1099Q, AOTC is complicated!
