Q. Can you use this same example if box 5 is around $800 less than box 1?
A. Yes.
Q. or only if box 5 is greater than box 1?
A. No.
Example Box 1 is $5000. Box 5 is $4200. Parents can only use $800 for the AOC. But if the student declares $3200 scholarship as taxable, parents can use $4000 for the AOC.
Q. In your example would you not put down anything for box 1 on the student's tax return?
A. Yes, put nothing in box 1. Put $3200 in box 5.
Q. WHY would you not put down anything for box 1 on the student's tax return?
A. Because if there is something in box 1, TurboTax will try to factor it into the calculations. You have already done the calculation. You calculated that $3200 is taxable. Entering that one amount, in box 5, gets it to the right place on the tax forms (line 8r on schedule 1).
