1098 T and 1099 Q - Do I include the 1098 T and 1099 Q on my children's tax returns or on my tax return? or on both?

[momoftwinz]

my 24 yr old son is in medical school. We provided financial support for his room and board for 11 months of last year. He received  Post911 GI bill money for his tuition 1/21-6/21. He had taken out student loans to cover the fall while he waited to see if got another military scholarship. He then commissioned in 9/21, and is now receiving an Army HPSP scholarship for tuition and a taxable stipend,but it was not received until 11/21. Thus he did make more than $4300(stipend), so we cannot claim him as a dependent. The Army not only back paid his tuition for the fall of 21, but also paid his spring 22 tuition at the same time....so his 1098-T shows scholarships/grants for 3 semesters and only Tuition for 2 semesters.We also pulled out the remaining money in his 529 since we had been paying all of his room and board expenses so we received the 1099-Q.  Due to the overage in box 5 or the 1098T should we just use both the Q & T on our taxes even though we know we won't get a tax credit?

[DanielV01]

No.  Since he is not your dependent, the 1099Q and 1098T will be on his return only.  It does not matter that you covered part of his expenses for the year.  Because of his age and income, he will claim all of the reconciliation necessary for these forms.  If you assisted in paying expenses, he will claim that on his return also.

[Dr-Neutrino]

Are you SURE about this statement:

"The scholarship amount in Box 5 is subtracted from the amount in Box 1".   Not on my 1098T last year or this?

In my case, I've paid for my child's Fall 2022 and Spring 2023.  The amount in BOX 1 is the amount we paid from her 529 less $4000 so we can get the benefits of the American opportunity tax credit (AOTC) 

The amount in box 5 is $20,000 but that's actually NOT included in that Box 1 number.

[RobertB4444]

What that means is that the scholarship amount will be subtracted from the tuition amount in order to calculate any credits. 

If the amount in box 5 is $20,000 and the amount in box 1 is $25,000 then you can only get a tuition credit for the $5,000 that was paid over the scholarship amount.  If the school paid it then you can't get credit for it.  And, unfortunately, room and board isn't deductible.

@Dr-Neutrino

[Hal_Al]

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 2022 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.

[Dr-Neutrino]

Robert

Ok -thanks - I was confused but now Ill be using the1098T for calculating the credit I'm more than covered by Box 1 being in excess of 50K with 20K scholarship.

On the 529 front where all this $ is coming from thanks to investing at birth in 2003,  the room and board does count as a qualified expense and enables one to pay for the majority of that with 529 funds and still get an AOC if they use $4000 or more of their own non-529 money?    Correct??

I did not directly pay the school from the 529 because it's always dicey over Christmas to New Year's because the school does not accept or make it easy for third parties (brokers) to electronically send the money.    The first year it took 10 days via US MAIL.   I now, first send the 529 $  to my daughter's checking account, and then she immediately transfers it to the school in the exact same amount(s) so we have a nice paper trail.   IS THIS OKAY? 

Last question:
With that 20K scholarship would the student have to pay taxes if they made $5K over the summer?   Im thinking NO as that 20K was used for the qualified deductible expense of tuition as she is working toward a BA. 

thanks

[Hal_Al]

Q. R&B does count as a qualified expense and enables one to pay for the majority of that with 529 funds and still get an AOC if they use $4000 or more of their own non-529 money?    Correct??

A. Yes.

Q. I did not directly pay the school from the 529 but send the 529 $  to my daughter's checking account, and then she immediately transfers it to the school in the exact same amount(s) so we have a nice paper trail.   IS THIS OKAY?

A.  Yes. Whether the money goes to her or the school, she is considered the "recipient".

Q. With that 20K scholarship would the student have to pay taxes if they made $5K over the summer?

A. The filing threshold for a student-dependent, with earned income, is $12,950 (2022).  None of the scholarship is taxable (" that 20K was used for the qualified tuition expense" ).

[Dr-Neutrino]

I have an odd case,  I am only responsible for paying for Undergraduate and this year I paid 100% of the Tuition R&B etc with 529 funds because I have just enough to cover the next (senior) year.    I'm retired and in the 0% Tax bracket but funded 4 years   Spending $4000 of my after tax money to get $2500 or less back didn't seem prudent. being in the 0% tax bracket.  

You advice seems very sound and appears to be accurate but TURBOTAX 2023 is not behaving nor does it allow one to get to the screen "Amount Used to Calculate Education Deduction or Credit"?  Trying to delete forms they pop right back.  The only way I could fix this was to override the $4000 default for the AOC and then the LLC popped up.  I then zeroed out that field but as a retired programmer this is VERY SLOPPY to me.    is there a cleaner way?    Why does TT insist that the default is everyone should get the credit.  Its backwards or at least a rather unfortunate pitfall that will cause people to unknowingly double-dip.