Excess Scholarships and Healthcare.gov

[PattyZarra]

My son has received more scholarships then his qualified expenses.  I have read on other questions that he files all the 1099-Qs and the 1098-T on his taxes and I don't file anything on mine.  He also had $3206.00 from a job.  My concern is that we have a 1095-A from Healthcare.gov.  It says we have to add his MAGI if he "has to file" taxes.  He can file to get his refund, but I won't have to add his income to mine.  He has to file if his unearned income is more than $1,000 and his earned income is more than $12,200.  The IRS says that excess scholarship income is counted as earned income, but when I do his taxes, TT is giving me a form 8615 for unearned income and saying his $2693 of excess scholarship is unearned income.  Why is it doing that when it should be earned income and it is on the earned income worksheet? How do I fix that?

[AmeliesUncle]

For purposes of the Standard Deduction, the IRS treats scholarships as Earned Income.  For all other purposes (including the Kiddie Tax), it is unearned income.

However, how much is the scholarship income and income from the 1099-Q?  It sounds like he is going over the $12,200 limit anyways.

And yes, if he has "taxable income" on Line 11b of his Form 1040,  his MAGI is added to your "Household Income" for purposes of the Premium Tax Credit (From 8962/1095-A).

[PattyZarra]

I don't understand how it could be both.  From what I understand the kiddie tax does not apply because he is over 18 and unearned income is from DIV and INT which he has none.  The 1099-Qs total amount are not taxable income only the earnings.  The one was used for tuition and the other earning amount was used for housing.  He has no amount on line 11b.  What concerns me is that the IRS says he "has to file taxes" if his unearned income is above  $1,100 and TT is making form 8615 for children who have unearned income and putting his excess scholarship money in there which is over $1,100.  So, if line 11b is zero, I should ignore the unearned income form and do not apply his income to my household income for purposes of the premium tax credit?

[AmeliesUncle]

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@PattyZarra wrote:

From what I understand the kiddie tax does not apply because he is over 18 and unearned income is from DIV and INT which he has none. 

TT is making form 8615 for children who have unearned income and putting his excess scholarship money in there which is over $1,100. 

So, if line 11b is zero, I should ignore the unearned income form and do not apply his income to my household income for purposes of the premium tax credit?

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1)  Kiddie Tax can still apply until age 24.  Unearned Income is ANY taxable income besides a W-2 or self employment profit.  That include taxable scholarships.

2)  Yes, TurboTax is creating that form because it sees he has over $1100 of unearned income.  BUT it is not actually taxing it, right?  That is because it ALSO looks at the "taxable income" on Line 11b.

3)  Fill out the 8815 in the program to make it happy, but it shouldn't be taxing it.  And yes, I would NOT apply it to your Household Income for the Premium Tax Credit.

[PattyZarra]

You said Form 8815.  Do you mean Form 8814, which allows me to file unearned income on my taxes or Form 8615, Tax for Certain Children who have Unearned Income of More Than $2,200.  If you mean 8814, I tried that and it didn't have a place for scholarships.  If you mean 8615 on his taxes, then how do I fix that?

BTW, I read in other posts, but I just want to make sure.  If he has excess scholarships, he files the 1099Qs and 1098-T on his taxes and I don't file anything on mine for education.  I claim him as a dependent on my taxes and he puts on his taxes that he is being claimed as a dependent.  Is that correct?

[AmeliesUncle]

Sorry, I meant 8615 (the one you had referenced earlier).

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@PattyZarra wrote:

BTW, I read in other posts, but I just want to make sure.  If he has excess scholarships, he files the 1099Qs and 1098-T on his taxes and I don't file anything on mine for education.  I claim him as a dependent on my taxes and he puts on his taxes that he is being claimed as a dependent.  Is that correct?

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Yes ... but there could be options.  In most cases he has the option to intentionally make MORE of his scholarship taxable (in most cases the optimal amount is $4000, but $2000 is an acceptable threshold as well).  That would allow you to claim an educational credit on your tax return.   

However, in your case you need to be really careful with that, because you don't him to have enough income that would create "taxable income" for him, resulting in his income being added to your Household Income for the Premium Tax Credit.

[PattyZarra]

It said in the other post, that I cannot get the credit and I am OK with that.  Do I have to fix the 8615 because he is not paying any taxes anyway or does that mess up my Premium tax credit?  If I have to fix it, how do I do that?

It said in HealthCare.gov that if he "had to file" then his MAGI would have to be added to my income and one of the reasons you have to file is if the unearned income is over 1,100 dollars.  Does this not count because it is not investment income?

[AmeliesUncle]

There shouldn't be anything to "fix" in regards to the 8615.  Just answer the questions in TurboTax.

As I said before, if he does not have "taxable income" on Line 11b, don't add his income.

[PattyZarra]

Thank you.  You have been very helpful.