My dependent Student son has W2 for 30K. He is my dependent for claiming education credits. He also has fellowship money that exceeds qualified education expense. Do I need to report he fellowship or he needs to do on his return?

[Nkm171964]

I have claimed my son as dependent in past years and also reported education credits on form 8863. He gets 1098T from college and I also get 1099Q from NY 529 account to pay for tuition each year. But this year(2023), he also got Research fellowship money (over 8K) that is non-qualified since his tuition is fully paid for using my NY 529 account savings. Now, I have read several postings here but I am still confused as to who should claim the extra fellowship money my son got? 

Questions:

1- Do I still claim his education credits as normal?

2- Do I also list his fellowship on my taxes? But that would raise my income and I may pay extra taxes.

3- Can I just claim him as dependent and then move all of the education expense and extra fellowship money onto his tax return?

4- Is it allowed to for my son claims all the education credits as in question 4?

5- Where on TurboTax and how can my son claim/list his fellowship money on his return for any of the scenarios/ suggestions to my questions?

Thank you for assistance!

[Mike9241]

1- Do I still claim his education credits as normal?

If a parent claims a child as a dependent, only that parent may claim the education credits.  if a parent is eligible to, but does not claim the child as a dependent, only the child may claim the education credit.

that raises the question of whether or not you're eligible to claim the child as a dependent

you can claim him as a qualifying child if all these tests are met
• he has the same principal abode as you for more than ½ the tax year. Temporary absences like for schooling are ignored
• if he/she is not a full-time student, he's under 19 at the end of the tax year. If a full-time student, he's under 24 at the end of the tax year.
• he hasn't provided over ½ of his own support
• he didn't file a joint return unless there was no tax liability but merely filing jointly to facilitate a refund of taxes withheld or estimates paid

support

• Includes amounts spent for food, lodging, clothing, education, medical and dental expenses, recreation, transportation and other necessities. i could not find a definitive answer on how 529 distributions affect support. 

2- Do I also list his fellowship on my taxes? But that would raise my income and I may pay extra taxes.

You didn't get the grant he did so if a portion is taxable, he would be the one to report it. if a portion was taxable he should have gotten a w-2 (no guarantee) so use worksheet 1-1 in pub 970

for more info see IRS PUB970 https://www.irs.gov/pub/irs-pdf/p970.pdf 

Tax-free

If you receive a scholarship, a fellowship grant, or other grant, all or part of the amounts you receive may be tax-free. Scholarships, fellowship grants, and other grants are tax-free if you meet the following conditions:

• You're a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
• The amounts you receive are used to pay for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution.

Taxable

You must include in gross income:

• Amounts used for incidental expenses, such as room and board, travel, and optional equipment.
• Amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant. However, you don't need to include in gross income any amounts you receive for services that are required by the National Health Service Corps Scholarship Program, the Armed Forces Health Professions Scholarship and Financial Assistance Program, or a comprehensive student work-learning-service program (as defined in section 448(e) of the Higher Education Act of 1965) operated by a work college.

3- Can I just claim him as dependent and then move all of the education expense and extra fellowship money onto his tax return?

see answer to 1

4- Is it allowed to for my son claims all the education credits as in question 4?

see answer to 1

5- Where on TurboTax and how can my son claim/list his fellowship money on his return for any of the scenarios/ suggestions to my questions?

If filing Form 1040 or Form 1040-SR, include the taxable portion in the total amount reported on Line 1a of your tax return W-2 received. If the taxable amount wasn't reported on Form W-2, enter it on Line 8 (attach Schedule 1 (Form 1040) 

[Nkm171964]

Hello thank you for detailed response. I do have follow-up questions/clarifications.

1-As stated in answer 1 above, I can claim my son dependent and also claim his education credit (as in past years, likely it would be American opportunity). 

 2- As for taxable fellowship he received, he would use line 8 and Sched 1(since he did not get a w2). However, since I am using TurboTax (TT), what part/section of walk me through interview on TT would I enter his fellowship income on his tax return. The interview only asks questions and does not specify which schedule would be used. Thanks in advance. Thanks.

[AmyC]

1. Since you are claiming your son and the education credit, you are set.

2. For his return, in the education section, you can enter the scholarship income after the 1098-T.

[Nkm171964]

Ok great.

for question 2, he has high taxable unearned income that would go under less common income? Correct to say? Thanks.

[DawnC]

If you enter the taxable amount on the screen that Amy shared above (the 1098-T screen), TurboTax will put that income on Line 8r of Schedule 1.     If you have the desktop software, you can add it to Line 8r on the Other Income worksheet.    See Form 1040 

[Nkm171964]

Thank you both- Amy and Dawn for clarifications!