I am trying to figure out if we can use the IRS QTRE "loophole" to claim a higher AOTC credit. I'm aware of the IRS publication that gives guidelines for "re-allocating" tuition scholarships and grants to non-qualified expenses like room and board. Essentially, students can add the grant or scholarship to the student's taxable income and thus enable the parents to claim the AOTC, even if the school actually applied the scholarship to payment of tuition and fees. https://www.irs.gov/pub/irs-utl/Pell%20AOTC%204%20pager.pdf
However, I am wondering if this policy can apply to the Georgia Zell Miller Scholarship, which is a tuition-only scholarship. Can Zell Miller be treated as paying for living expenses rather than tuition or is it required to be claimed as tuition-only? I suspect the latter, since Zell Miller states that it covers tuition, but just checking to be sure.
