Q. The 1098-T Box 1 ($10,526) includes fall 2023 and spring 2024 charges! No R&B, as you said. (Spring bill posted Dec. 2023; not paid till Jan. 2024). Can I enter my own numbers (just fall QEE) into the 1098-T?
A. Yes.*
Q. The 1098-T only counts $368 of the $790 fees we paid as “mandatory.” Except for health fee, could orientation and campus bus fees count not as AOTC QEE but as529 AQEE?
A. The rule is the fee must be "required for attendance". Bus fee: no. Orientation fee: probably yes. Health insurance: usually no, but yes if paid to the school and required for attendance.
Q. Could those additional fees matter in future years with higher 529 distributions (not all qualified) and lower scholarships, i.e, more 529 taxable earnings?
A. Yes.
Q. Re: 2023 $4,672 taxable scholarship. When is it earned vs. unearned income?
A. Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $13,850 filing requirement and the dependent standard deduction calculation (earned income + $400). It is not earned income for the kiddie tax and other purposes (e.g. EIC). For grad students and post grad fellows, scholarship, stipend and fellowship income is earned income ("compensation") for IRA contributions.
Q. if my student has self-employed earned income of $2,935? Required to file?
A. Yes. The filing requirement for self employment income is a mere $400 (they want to collect social security & medicare tax).
Q. $2,935 (earned) + $4,672 tax. sch. (earned) = $7,607 income – $8007 ($7,607 + $400) = – $400 or no taxable income?
A. Correct.
Q. BUT, that $4,672 is still treated as unearned income (> $2,500) for purposes of calculating kiddie tax? So we will owe kiddie tax on $4,672 – or on $4,272 below?
A. No. Kiddie tax is an either or calculation (your unearned income or your taxable income). Since there is no taxable income, there us no kiddie tax. Form 8615 will have to be completed to show the either o calculation. TT does that.
Q. Aren’t taxable 529 earnings considered unearned income?
A. Yes.
Q. But I’ve read taxable 529 earnings aren’t subject to kiddie tax?
A. Not true.
Q. Using 2024 real and estimated (529) numbers – which is more correct (required to file)?
A. First one. Scholarship is earned income for the taxable income/standard deduction calculation.
Q. Also, if our 19-year-old makes $6,300 in earned income, are they no longer our tax dependent?
A. No. There are two types of dependents, "Qualifying Children"(QC) and Other ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student status, a relationship test and residence test.
Q. Does that affect whether kiddie tax is due? Or whether lower dependent deduction is used or full standard deduction ($14,600) in 2024?
A. Both.
*The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly your student has taxable scholarship income.
If you claim the tuition credit, you do need to report that you got one or that you qualify for an exception (the TurboTax interview will handle this)
You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid. You will also reach a screen that allows you to adjust the scholarship amount for "amounts not awarded for 2023 expenses".
Or if you find it easier, just change the numbers in boxes 1& 5 to what your records show. The 1098-T that you enter in TT is not sent to the IRS
