Many thanks for the help, @Hal_Al . This all looks great, but I’m still not tracking with you 100%.
I understand shifting expenses between buckets (529, AOTC, etc.) but struggle with how we can use or allocate expenses charged vs. the actual expenses we paid.
I know we have some leeway since we’re paying tax on the scholarships that covered those billed expenses, but it’s not fully syncing in my brain.
– We can claim $4,000 in AOTC expenses, even though we ourselves only paid $2,943 in total expenses, only $1,574 of which were QEE?
– We paid only $1,369 of the $6,341 charged for room and board, but we can still allocate the full $6,341 charge to our $4,000 (529) distribution?
– Re: “$5,361 available tuition expense” – If our $4,895 restricted scholarship covers 100% of the actual tuition charge (with only $790 fees + $784 books in QEE remaining) can we really treat $1,631 as tuition/QEE?
– The 1098-T Box 1 total shows payments made on our student’s behalf (including non-qualified R&B) rather than payments we ourselves made. But it’s okay to use that $10,526 as qualified expenses any way we need to, so long as the equation balances?
– We can do all this because we’re being taxed on scholarships, which is akin to shifting scholarship dollars to earned income (and increasing our QEE)? And because of the way the college has chosen to report “paid expenses”?
IRS Pub. 970, pg. 16, says: “Finally, the amount of the scholarship or fellowship grant that is applied to non-qualified expenses can't exceed the amount of the student's actual non-qualified expenses that are paid in the tax year.”
I took that to mean that we only had $1,369 in non-qualified expenses paid to play with.
Am I being too literal?
Again, thanks.
