Hello, I am the parent of a college student whose 1098-T shows more grant money than tuition; however, this is a need-based grant that was also awarded to meet full financial need (including room and board).
The grant money exceeds the stated billed amount by about $3k. We also had 529 distributions (used for educational expenses).
We claim my daughter as a dependent. TurboTax walked me through some scenarios where I could allocate that our (parent) out-of-pocket expenses went to tuition, and the school grant partially paid room and board (not untrue) to qualify for the AOTC.
The problem arises when I input the 1098 info in my student’s taxes (TurboTax asks for this). She only made $700 from a summer job W2. Grant money was $3k above tuition. TurboTax is taking all 529 distributions and taxing it, plus taxing the 1098-T numbers on my daughter’s return. (Saying she owes over $2,000 in federal tax).
This can’t be. At best, she made $3700 (grant excess plus job). Moreover, I think we may already have paid unnecessary taxes on these 529 distributions. Since when are they taxable income? Any help would be appreciated!
