Full time college student with scholarships. Assume not eligible for AOC or Lifetime Learning Credits. Student is claimed as dependent and files own tax return which includes both 1099Q and 1098T. Student received:
1. 1099Q for $1,500 distribution from ESA Coverdell to pay for required college fees not covered by scholarships. 100% used for college fees (qualifying educational expense).
2. 1098T which shows: (A) Box 1 - $20,000 (Qual. Educational Expenses) and (B) Box 5 - $22,000 (scholarships).
1098T implies taxable scholarship income of $2,000. However, Box 1 includes the $1,500 of fees paid with the disbursement from the ESA Coverdell Account. The actual taxable scholarship should be $3,500 (the scholarship that covers rent which is not a Qualifying Educational Expense).
Should I adjust the Box 1 reported value so that it is $18,500 or am I not required to do that (given that the 1099Q distribution should be non-taxable)?
