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

@gordda40, I am working on another project this morning, but will respond to your questions this afternoon. It sounds as if you have everything entered correctly, except perhaps the 1098-T on the parents' return.

Thank you very much!