No. Let's start with the 1099-Qs - you said it went straight to the college. I am going to assume this was room and board since there are scholarships. It may have gone to education expenses.
Step 1 - Did all of the Q get used on 529 qualified Room and Board and Qualified Education Expenses - Internal Revenue Service?
If yes, the Q should not be entered. A nontaxable transaction should not be entered
If no, then the taxable amount will be added to your return.
Step 2 - Do you qualify for education credit? You cannot claim the credit if your MAGI is over $90,000 ($180,000 for joint filers).
No, Income does not allow the credit:
- the 1098-T is not entered on the parent's return
- the 1098-T is entered on the student return
If the scholarships are not restricted to tuition and no Q income used on education expenses, the answers are:
Yes, Income allows the credit:
- Enter the 10998-T tuition of $4000 on your return and everything else blank.
- Enter the 1098-T on the students return but take out $4000 from box 1 (since it is on your return).
If you had restricted scholarships or some of the Q went towards education expenses, you will have to account for that and refigure your numbers. We are glad to help but we need to know more to move farther. The IRS has a great brochure that explains how scholarships and tax credits interact.
Step 3 -
Does the student need to file a tax return is the next question. Take this quick quiz, Filing requirement.
Reference: IRS Publication 970, Tax Benefits for Education states:
Page 45: Don't report tax-free distributions (including qualifying rollovers) on your tax return.
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