1098-T and AOTC

Forum|Forum|7 years ago
February 19, 2019
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I am helping my niece and sister-in-law with taxes. My niece received her 1098-T from college and has more scholarships, etc than qualified expenses, so she will need to claim the excess as income on her return. However, she did pay tuition out of pocket in the summer of 2018 because not as much aid is available during the summer. The questions are: Would the out of pocket tuition cost be eligible for the AOTC and filed on her mom's return? Would the 1098-T information need to go on both of their returns? It will be entered on my nieces to claim excess scholarships and grants as income. When I enter it on her moms return, it indicates no eligibility for any education credits. How do we make this work correctly so that she can claim a credit for those tuition costs that my niece paid?

Best answer by BarbL

Could you go through your entry of the 1098-T on the parents' return? It sounds as if you marked the wrong box on the page asking "Was any of the student's financial aid already included in income?" This question is asking about a different type of scholarship, often reported on a W-2 or 1099-MISC. Respond No to that one, then keep clicking through.

You are looking for the question "Did student pay for Room and Board with a scholarship or grant?" This is where you select 'yes' and indicate the amount on the following page.

@gordda40 Our conversation was accidentally deleted. I've attached a screenshot. This should resolve things for you!

NCperson

Level 15

Whomever is listed as the recipient on the 1098-t needs to report it on their taxes

Certain expenses are not deductible in any event which is why the college did not list them in box 1

Please describe what was “out of pocket” during the summer that was not on the 1099-T

Also read the link below carefully
https://www.irs.gov/credits-deductions/individuals/aotc

BarbL

Level 7

The 1098-T causes a lot of confusion, but is really quite simple:

If a parent claims the child as their dependent, the parent will claim the 1098-T and education expenses, regardless who paid.
If the parent does not claim the child as their dependent, the student will claim the 1098-T and education expenses, regardless who paid.
If the scholarships, grants, and other aid (except loans) is more than the tuition, fees, books, and supplies, the student will claim the 1098-T and education expenses, and will claim the excess aid as taxable income.

Your situation is a bit more complicated, because of the summer tuition. Was that summer payment included on the 1098-T? If so, it has already been factored in and there is nothing else to claim or report.

In some situations, a student is allowed to allocate scholarships to living expenses (rather than tuition, fees, and course materials) and can then use amounts paid out of pocket to qualify for education credits. However, this depends upon the restrictions of the scholarship.

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gordda40Author

Level 2

Thank you for the reply. So my niece receives one scholarship that is specifically need to be applied to tuition and books, and is automatically done so by the school. The other scholarships and grants are able to be used for any expense. After going through the 1098-T, the scholarship used for books and tuition is included in box 5, but the only thing in Box 1 is tuition for tuition. They did not include the cost of the required books or the college billed testing exam fees. That will add close to 1500.00 to her QHEE, but she still has 1,000 more in scholarships and grants than qualified expenses. One reason is that the scholarship dedicated for tuition and books place $1750.00 in her account prior to the end of 2018, even though it was for Spring 2019 tuition.

She paid the summer tuition out of pocket and it is included in the amount they have in box 1. With the exception of the scholarship dedicated to tuition and books, she used her other scholarships to help pay for her housing, along with some 529 money, so she does have an outstanding out of pocket cost of about $2800.00 for the summer tuition. We have never done this, but how would we go about claiming these expenses and/or scholarships to allow her mom to claim an AOTC? I would love information on how we make that work in turbotax and I understand you play with the figures to find the sweetspot as far as taxes?