Q. Are you suggesting that the $8,500 scholarship can be reported on the student's tax return while the remainder of the Form 1098-T amounts can be reported on our (the parents') return - ie: the amounts can be split between returns as long as all amounts are reported on one return or the other?
A. Yes. The results you are seeing are typical.
The 1098-T is only an informational document. The numbers on it are not required to be entered onto the student's tax return, just because it is in his name.
If so and after making this change, the student does not owe any Federal Tax (as you predicted), but does now owe NY state taxes (due to the Other Income generated). However, this is more than offset by the decrease in our (the parents') Federal taxes owing (due to the decrease in our Other Income). Our NY State taxes remain unchanged (Other Income decrease offset by NY 529 deduction/earnings decrease - so no impact). The 1098-T was issued in the student's name. However, he is our dependent and we paid the college expenses and the 529 beneficiary is his father.
You said "the 529 beneficiary is his father". I assume you meant the recipient of the 529 distribution (form 1099-Q) was his father. The 1099-Q is also only an informational document and is not required to be reported. But, if it does need to be reported, it goes on the recipient's return.
