Q1: Parents need to determine how much scholarship money we can have our child claim as taxable income, and then deduct that from the scholarship money on the parent tax return so there are more qualified expenses for us to pay. Is that the correct way to look at it?
A1. Yes, basically. But, it is not necessary to allocate any of the scholarship to room & board or any other specific expense. Just say it's taxable. To make some of the scholarship taxable (re-allocate some of the expenses), you To do that in TT, usually (there are other workarounds) must tell TT how much you want taxable by saying it was used for room &board. Note the wording at that screen “or other expenses”. You didn’t have to literally use the scholarship for R&B.
Q2: Do we you use qualified expenses paid IN 2020 or billed FOR 2020 to determine eligible expenses for an AOC?
A2. You count what you actually paid in that year. So, you cannot count what you paid in 2019 for 2020. You can count what you paid in 2020 for 20212. The scholarships, however, are allocated to the year of the expenses, regardless of what the 1098-T says. You will reach a screen, in TT, that allows you to adjust the scholarship amount for "amounts not awarded for 2020 expenses".
Q3: Can we count an expense for a used computer in 2020 if our child had virtual classes, but does not have a receipt?
A3. Yes if you paid for it in 2020. Not having a receipt is only a problem if audited.
Q4: My child received Covid Relief from the college. Does this get deducted from our qualified expenses?
A4. No. That's tax free money, like the stimulus you got, and is not designated for college expenses , per se.
Q5: Would any of the vehicle expenses, parking tags, summer food, etc, count as qualified expenses?
A5. No. Nothing in the covid laws changed how transportation expenses are handle. They're still not qualified expenses.
