@Hal_Al
My daughter asked about the specifics on this last year, but I cannot find the thread and I've been searching off and on for days. 😓 Now I'm trying to make sure I'm doing this right for the next child.
I know how to do the parent portion to receive the AOTC. In my notes I have a formula for figuring out what portion of scholarships or ESA will be taxable, but I'm not sure I have it right. (You already cleared up my confusion about expenses PAID.) The ESA gets taxed less $ for $ used than scholarships/grant money because of all the basis calculation work, so I should use the scholarship/grant $ first in my calculations?
Qualified expenses PAID - $4000 for AOTC - Scholarships&Grants paid out =Difference 1
Difference 1 (if positive) + room& board -ESA= Difference 2
If Difference 1 is negative, that much of schols/grants already taxable.
If Difference 2 is positive, none of ESA $ is taxable. If it is negative, that much of the ESA $ is taxable and we do the basis calculations to find out how much.
Ex.
$29,000 paid - $4000 AOTC - $24,500 schols/grants = $500
$500+ $12,000 room&board - $13,000 ESA = $-500.
So, none of schols/grants taxable, but $500 of the ESA $ used is taxable, and we need to do the basis calculations to figure out how much of it to enter. And whatever that number is, when doing the shortcut, put it in as 1098T box 5 scholarships with $0 as the box 1 costs.
Do I have that right?
Thank you!
Added: This child had ~$15,000 income from part-time jobs in the same calendar year
