Qualified expenses PAID - $4000 for AOTC - Scholarships&Grants paid out =Difference 1
29,000 -4000 -24,500 = 500
Difference 1 (if positive) + room& board -ESA= Difference 2
500 + 12,000 = 12,500 -13,000 = -500 (negative)
If Difference 2 is negative some of ESA $ is taxable and we do the basis calculations to find out how much.
500 /13,000 = 3.8% of the earnings are taxable (about $300 of taxable income)
Because she already has over $13,850 of job income, declaring some of the scholarship taxable is not the best option (although the tax difference is only about $20). The amount of taxable earnings (less than $1250) is not enough to trigger the kiddie tax.
