$25000 of excess of scholarship, tax return, education credit

[ueiiun]

$25000 of excessive scholarship for 2024, so is it still possible to use "tax loop hole" method to claim full american education credit?  it is a lot of money to add on my son's internship income, the total will be $69000, so my question is can I put the excessive scholarship to be my income on my tax return? my son only report his w-2 income (summer internship money) on his own return?  can I still get the education credit on my tax return?

[KrisD15]

No, you can't claim the excess scholarship on your return, the student needs to.

The tax on 69,000 versus 44,000 for the student would probably be more that the education credit, 

(it would bump him from a 12% tax rate to 22%)

so it probably would not be advantageous to have the student claim the additional income in order to take the credit. 

[Hal_Al]

 Q. So is it still possible to use "tax loop hole" method to claim full American Opportunity credit(AOC)?

A. Yes.  

The AOC is 100% of the first $2000 and 25% of the next $2000.  That still beats the 22% tax rate the student will pay on the extra $4000 of scholarship income. 

Although you may want to just have him claim $2000, instead of $4000. 

[MonikaK1]

In addition to that provided by @KrisD15 and @Hal_Al,  this IRS presentation provides more information and examples on the issue of whether to report excess scholarships as income in order to maximize the American Opportunity Credit.

@ueiiun