Education Expenses

[tsuewalker]

Client has a son who received more money for scholarships ($6295) than his actual expenses were ($5639). Does the client have to claim the additional monies this child received for scholarships?

Same client has a son who is 24 and is a full time student. He earned from the college he attends $3141. Can the client still claim this child as a dependent and claim his education expenses? Same son had education expenses ($6596) that were MORE than his scholarships ($3320). Do I subtract the amount of scholarships he received from the qualified expenses.

Thanks for your help in advance

Tanya

[David1980]

In first scenario, the SON received scholarships exceeding the qualified educational expenses, correct? Is son filing a tax return? Does son have any filing requirement? If not I believe that income is going to end up nowhere.

For 24 year old son you have to look at qualifying relative rules.

As far as coordinating scholarships with educational expenses, you may be able to treat part of the scholarship as taxable. If the scholarship can be applied to non-qualified expenses such as room and board you could apply it towards those non-qualified expenses and count any payments the taxpayer made as applying to qualified expenses.

[FEDUKE404]

Scholarship income taxable to student

IF there is indeed taxable scholarship income, that income belongs to the student and shows up (included in) on line 7 of the student's Form 1040 with the separate annotation "SCH 1234" printed on the line per IRS rules. The IRS instructions explain how to calculate and report. Your tax software should handle it. You have to do the calculations to determine if any is taxable. IIRC, the kiddie tax can also apply to that "scholarship income" ?

The college expenses for the other child stand alone. Be careful of the "wages" paid by the school. . .there may have been some strings attached to receive the funds. Otherwise, it's just another day at the office with the Form 1098-T and all its fun.

FE

[taxea]

Son in #1 files a return as dependent of another. Son in #2 files his own return if applicable.

[Roland Slugg]

Lots of conflicting information above, so I will add a little of my own.

Son #1: The additional $600 is taxable to him if, indeed, it does exceed his qualified education costs. Those costs, however, include required books, equipment and supplies, in addition to tuition of fees, so maybe there was no excess after all. If there is a taxable excess, it is not subject to the "kiddee tax." The kiddee tax exemption is around $2,000 now.

Son #2: He is not a QC but he appears to be a QR. If so, the parents can claim a dependent exemption for him on their return, but he can not claim himself on his own return. Nevertheless, he is still entitled to a standard deduction, and, based on the facts given in the OP, will wipe out the $3,141 he earned at the college. Yes, for the education deduction, reduce the qualified expenses by the amount of the scholarship.