The IRS allows a lot moving things around for the best scenario. Since the parents cannot claim an education credit, would the student be able to claim the credit if not claimed by the parents? Usually, a student does not have enough income to get any real benefit.
If the parents are claiming the student and no credit is on the line, you just want to reduce tax liability to the student and put as much as you can into QEE. Yes, the boxes are not well labelled in my opinion, this year. I am hoping the update will fix that. Thankfully, you are smart and caught the difference.
Scholarship income is a hybrid income and can trigger the kiddie tax. Less income means less tax. Once you finish, you can see if your student needs to file a return.
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