1098-T line 1 not correct

[anonymouse1]

We got a 1098-T for 2024 where line 1 is less than the tuition and fees paid in 2024 (forget about R&B, meal plans, books).  I understand that not all expenses (e.g., R&B, meals) count toward the AOTC, but we're not claiming the AOTC this year.  However, we did take money out of the 529 (much less than what the university charged us, since the 529 is running low), and now over $2500 of that is being taxed as income.  Where do I put the additional charges the university is not including on line 1?  Or do I modify line 1 to be what we actually paid for allowable 529 expenses?

[MarilynG1 · Accepted solution]

If you're not claiming the AOTC, and your 529 distribution was all used for Education Expenses, you are not required to enter either of these documents into TurboTax.  Just keep them for your records.

Here more info on Form 1099-Q and Form 1098-T.

@anonymouse1 

[anonymouse1]

So even though we filed the 1098-T the last 2 years, we don't need to fill out that portion of the 1040 this year?  We're not claiming it since Roth conversions put us over the income limit.

[MarilynG1]

No, the 1098-T is not required to be filed, unless you're claiming an Education Credit.

@anonymouse1 

[anonymouse1]

Great, thank you.  While we're on the subject, if our 21 yr old can pay more than half her own support in 2025 (counting a 529 distribution we will have sent to her instead of the parents, so she can pay fall tuition), can she claim the AOTC for this year if we don't claim her as a dependent?  She has a summer job that includes housing, so if the 529 distribution for fall goes to her (and maybe she claims her scholarship as income), that's achievable.  I'm having trouble interpreting the rules for a student who *can* be claimed as a dependent vs one who *is* claimed as a dependent.

[AmyC]

1. The student may not get as much credit as a parent since AOTC reduces your tax liability and is only partially refundable (up to $1,000). A parent claiming the child has a higher chance of getting the full $2,500 credit.

I suggest looking at the IRS Worksheet for Determining Support. Vacations, lodging, many things go into supporting a student. If the student is providing half of their support, then they should file their own return and claim the credit.

2. Can be claimed and is claimed has a lot of area to cover and questions in between. For example, if the parents are both disabled and don't file a return, the child isn't being claimed but could, if the parents were filing. The program walks through all the necessary questions, including if you have a parent alive, and will determine which of the rules apply to the education credit.

References:

Rules for Claiming Dependents on Taxes - TurboTax - Intuit

AOTC - American Opportunity Tax Credit -IRS

[anonymouse1]

Our income will be above $180,000 so we will not qualify for the credit, which is why I'm asking if the student can claim the credit (only worth it if she owes more than $500 in taxes) if we don't claim her as a dependent even though we *could* (as long as she pays more than half her support this year).

[KrisD15]

Yes your dependent student may claim the (non-refundable portion) credit.

In your situation, support does not matter since you are saying 

that the student IS a dependent

The dependent student in this situation can file a return and claim the non-refundable portion of the credit-

they select "Another taxpayer can claim me"

BUT THEY ALSO SELECT "Another taxpayer will not claim me"  

They would continue through the TurboTax program, enter the education expenses and if they qualify, they would get the non-refundable portion of the credit. 

A non-refundable credit means the credit can lower the tax liability, but not below zero. If there is excess credit, that excess is lost. 

The student is filing as a dependent, so they do not need to meet the requirements of not being a dependent. 

See IRS Pub 970 page 20 

[anonymouse1]

Thank you.  We don't expect her to be able to claim the refundable part.  I just wanted to make sure she could claim the nonrefundable part, IF her tax bill is going to be over $500.  Frankly, I haven't looked at the single filer standard deduction, so she still may not have any tax bill at all, even with earning $18/hr over the summer.

But, for the sake of argument, let's say she earns $9000 gross this summer, housing is included so we won't be paying for it.  She pays for her own groceries all year, and for her fall rent out of her savings (from the summer job plus what she has left in the bank from last summer).  We paid spring tuition and meal plan.  If the 529 pays the school directly for tuition and fees (and perhaps a "commuter" meal plan for lunches on campus) in the fall, then the only support we would be giving her in 2025 is the spring payment to the school of a little over $12,000.  Would she qualify for the refundable portion of the AOTC if the 529 paid say $10,000 in tuition and fees to the school in the fall, and she paid over $3000 in rent for the fall and groceries all year (a full meal plan for 1 semester is over $3000 and room is about the same)?  Or would she only be able to claim the nonrefundable portion since her gross earnings were only $9000 and her *earnings* need to be over the $12,000 that we paid in "support"?

[RobertB4444]

You can pay her tuition as a gift.  And she will be paying more than 50% of her living expenses so she should be fine claiming herself and getting the AOTC.

@anonymouse1 

[anonymouse1]

Sorry, if the 529 pays the whole tuition then no one can claim the credit.  So let me modify the scenario.  We've paid $12,000 (rounding) for her support so far in 2025.  If she uses a $4000 scholarship (which she claims as income) for fall tuition, and has the 529 pay $6000 directly to the school, then takes $4000 out of the 529 to pay her rent and groceries (so still total of $10,000 out of the 529, but none of it paid to parents) for a total of $14,000 and she supports herself all summer with the included housing and paying for her own groceries (no car so no expenses there), would she be able to claim the refundable portion of the AOTC?  Her earned income would be $9000 plus the $4000 fall scholarship and she could also claim the $4000 spring scholarship as income.  She's still on our medical  and dental insurance but it's the same premium for 3 people as for 2 people, so do we have to count any of that as her support?  Or only what we might pay out of pocket, say if she needed a filling and there was a copay or deductible that we paid?

[MarilynG1]

In order to be considered independent, a student has to pay over 50% of their support with earned income.  Paying expenses with student loan, scholarship, etc. funds does not constitute self-support.

Here's more info on Did I Support Myself? and What does Financially Support Mean?

@anonymouse1 

[anonymouse1]

So even if a scholarship is claimed as taxable income, it's not "earned"?  She would have to pay more than 50% of her support (and tuition counts as support) out of *earned* income, not taxable income, not prior savings balance, so in essence, gross wages have to be more than the 50% of the support?

[MarilynG1]

It depends.   Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $14,600 filing requirement (2024) and the dependent standard deduction calculation (earned income + $450).

Savings would count.  

Here's more info on Taxable Scholarship Income.

@anonymouse1 

[anonymouse1]

I deleted the 1099-Q and the 1098-T is still there but now TT is saying that she doesn't qualify for the "other dependent" $500 credit.  Should I add in the amounts that are not on line 1 of the 1098-T (I can go to Forms view and see that) and put the 1099-Q back in?