1098-T for a dependent with scholarship earned income question

[wsucougs]

Hello,

My dependent daughter received a 1098-T in which box 5 exceeded box 1 by $2984, which she would need to declare this on her 2021 tax return as unearned income.  She had approximately $500 in required books and fees which brought this unearned income to $2484.

My daughter had no other income, either through wages or interest, no W-2, etc.  She has not completed her tax return, however we have entered the amounts into her return and is shows she owes $0 in taxes as she has a standard deduction of $2834.  Does this sound correct?  I didn’t think she would have any sort of standard deduction as I claim her as a dependent on my taxes.  

I entered the same information on my taxes and I do not receive a tax credit, nor does this add to my income.

FYI, I filed an extension and will be filing my return shortly, which is why I’m asking about a 2021 tax event. 

Thank you!

[Bsch4477 · Accepted solution]

Dependents – If you can be claimed as a dependent by another taxpayer, your standard deduction for 2021 is limited to the greater of: (1) $1,100, or (2) your earned income plus $350 (but the total can't be more than the basic standard deduction for your filing status).

She doesn’t have a filing requirement and what you see on TurboTax is correct. 

[wsucougs]

Thank you so much for your prompt reply. 

So if this is her only income, she doesn't have to file? 

This was most likely a one time event (receiving a scholarship which was greater than her tuition), but out of curiosity, how much could a dependent receive in scholarship income (treated as earned income) without having to file? (assuming that was their only income).

I have one addition question.  My son was a full time running start student and I received a 1098-T for him as well with tuition paid and no scholarships or grants.  I would like to claim this on my taxes (using Turbotax Home & Business), however the American Opportunity Credit is being applied, however I want to use the Lifetime Earning Credit, as he has 3 or 4 years to go and I don't want to use the AOC, even though it would give me a greater credit for 2021.  My question is, how do I get this edition of Turbotax to swich to the Lifetime Earning Credit?  And If I understand correctly, I can use the Lifetime Earning Credit for one year, and still use the AOC for 4 more additional years (maximum).

Thank you very, very much!

[Bsch4477]

Normal standard deduction is $12,550 so earned income less than that avoids a filing requirement. 

If you tell TurboTax that your son is not a degree student it will not give you AOC. Note that although he is taking college courses which may count toward a degree, as a high school student he is not eligible to be enrolled as a degree student at the college. 

[Critter-3]

Yes you can choose the LLC instead of the AOC ...in the program you should be able to make that choice in the education credit section at the end.  If you are not and want to force the LLC then simply say you already took the AOC 4 times already even if you have not.

[rjs]

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@wsucougs wrote:

My question is, how do I get this edition of Turbotax to swich to the Lifetime Earning Credit? 

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In the Search box type the word letme (just like that, with no space), then click the link that says "Jump to letme." It will ask you if you want to change your education credit or deduction. Click Yes. On the next screen click Continue. On the next screen you can select the education credit or deduction that you want to take.

[wsucougs]

Thank you so much for all of your help, this has answered all of my questions!