Thanks for sticking with me on this confusing topic! I really appreciate the assistance!
I was able to successfully include the scholarship in her income and add "SCH" and the amount 2805 to line 1 of her 1040. As you stated, her AGI went up but her taxes did not change because she is still under the threshold. I assume I still need to send in her amended taxes to show she is claiming the scholarship money to back up the AOTC claim on our amended return even though her taxes did not change? She did file taxes in 2018 because her summer employer withheld taxes for some reason and she just free filed and received a full refund. Her state taxes did go up a little with the increased AGI so I'd probably need to amend her state return.
One last question: Are my numbers above to claim the scholarship amount of $2805 as income correct? Do I have to account for the fact that $1064 (distributions $4544 - room & board $3480) of the 529 was applied to the tuition bill in my figures? Or are we just dealing with the $12695 scholarship here? I just want to make sure I'm doing the math correctly before mailing these out.
