Do I have to use the amounts on the 1098-T if they don't reflect reality?

[LMA1fromny]

On my son's 1098-T Box 5 contains 52M in scholarship. 15K Room & Board and 37K for tuition.  Tuition actually costs 47K, so box 1 shows 47K, 37K in scholarship aid plus our check for 10K.  Since Box 5 is greater than box 1 so it looks like we paid nothing for tuition and that he actually needs to show his scholarship as income as it appears he was "paid" to go to school.  Shouldn't the school only report monies for Tuition Related Assistance in box 5 so there is an apples to apples equivalent to the tuition related expenses?    

[KrisD]

I may be reading your question incorrectly, but be aware that scholarships used for room and board are taxable to the student. 

Box 1 shows 47,000 tuition and Box 5 is 52,000, that leaves 5,000 taxable to the student. Be sure to also account for books and supplies. Whatever of the 5,000 went to books and supplies is also tax-free. 

Anything left that you allocate to Room and Board is taxable to the student. 

If you allocate any of the expenses to a credit that amount will also become taxable to the student (sometimes the credit to the parent is worth more than the tax to the student).

CLICK HERE for IRS Pub 970 Tax Benefits for Education

[LMA1fromny]

About the $10000 I paid by check to the school to cover the tuition not covered by scholarships, can I declare the 2500 in education credits that I was entitled to the previous year( my income is well below the phase out threshold )?

[KrisD]

No, the IRS is very fussy about only allowing credits in the year they apply to. If you were entitled to a credit last year, you can amend the 2017 return to get that credit. If you were over the limit last year, so was not able to claim the credit, you can't take it this year. Your 10,000 payment is offsetting the taxable scholarship this year for the student. Make sure none of the scholarship is for a different year's expenses.

[LMA1fromny]

Sorry, I mentioned “previous year” I simply mean do I get the same 2500 credit this year as I did last year as I paid 10,000, well over the 4000 threshold required to declare the American opportunity credit or whatever it is called these days.

[KrisD]

You could, it's your choice. Allocate the 10,000 for the credit, which means there will be taxable scholarship that the student might need to report. Enter the 1098-T, enter any additional expenses, like books, and answer all the interview questions, there are a few. You'll finally get to a screen that says "Maximize My credit" and the program will calculate the best allocation.
Type   letme   into the search box to see which credits you are eligible for and change the choice of credit if you'd like.

[LMA1fromny]

Thank you!