Grants and the AOC

[dkss]

More Info

That's the first question -- first 4 years of post-secondary education, etc?

Second question is "Does she meet the special qualifications for the refundable portion of the AOC?"

If she meets those qualifications, and all or part of the grant is not explicitly allocated to qualified educational expenses, I would think you could do what you suggest.

She meets all qualifications for the AOC.

I have a copy of her school account activities. All grants and loans are placed into the account and then any excess is refunded to her. Being that her grants already exceed her educational expenses and she is receiving a refund from the school of the extra monies, I assume that means the grants are not restricted in their use.

I will check with the school to see if the grants are "restricted".

Debbie

[Gary2]

There are cases where the funds are deposited with the school, which then releases funds for living expenses to the student. You'll need to find out which, if any, of the grants permit using the funds for purposes other than tuition.

Keep in mind that grant funds used for living expenses are taxable income. There may be a W-2 or a 1099-MISC, or possibly the income will need to be reported manually. In the last case, you'll need to check whether it goes on line 7 or line 21, and whether or not it's eligible for EIC purposes.

[taxmom34]

aren't the grants and scholarships paid directly to the college, not the taxpayer? if so, how can you allocate grants to living expenses. and isn't there somewhere that says those funds used first for education. just a thought on my part.

[appelman]

Does she really qualify for AOC?

That's the first question -- first 4 years of post-secondary education, etc?

Second question is "Does she meet the special qualifications for the refundable portion of the AOC?"

If she meets those qualifications, and all or part of the grant is not explicitly allocated to qualified educational expenses, I would think you could do what you suggest.

[dkss]

Adult client is going to local community college. Made a whopping $400 in earned income for the year. She received a Pell grant, an Indiana state grant , a SEOG, and student loans to pay for her college and "to live on". Total educational expenses are about $4000, total grants are about $6000, and student loans about $7000.

Question: Can the grants be allocated toward the living expenses and not the educational expenses, therefore making the grants taxable income and the educational expense paid with student loan proceeds eligible for the refundable portion of the AOC?

Debbie