Taxable Scholarships

[TXEA]

The student taxpayer is not eligible to be claimed as a dependent by his parents. He provides more than half of his support through W-2 earnings alone, and parents provide very little financial support. I prepare both returns.

Numbers below are rounded for convenience

Total Scholarships 15500

Qual Educ Exp 9500

Taxable Scholarships 6000

(By the way, I have reconciled the blasted 1098-T's by year to compute this - i.e., tuition and scholarships assigned to correct tax years.

His W-2 earnings are 12000

His room and board costs for the year are 8000

Pub 970 discusses reporting scholarships as income "voluntarily" to maximize an education credit (AOTC for this client).

Pub 970; however, indicates that the amount of "voluntarily" reported scholarships can not exceed the NQ expenses for the year (which Pub 970 seems to imply is room and board). NQ expenses are 8000. I think based on this I can voluntarily report an additional 2000 as taxable scholarship (and thus show 8,000 as taxable for the year as opposed to the computed amount of 6000). Then, claim 2000 as qualified expenses for the AOTC.

Does anyone have any thoughts or have any experience to know if I am missing something here?

[TXEA]

Additional Information

Here is the reference in Pub 970 regarding the amount that can be voluntarily reported as applied to NQ Expenses:

Finally, the amount of the scholarship
or fellowship grant that is applied to nonqualified expenses
cannot exceed the amount of the student’s actual
nonqualified expenses that are paid in the tax year. This
amount may differ from the student’s living expenses estimated
by the student’s school in figuring the official cost
of attendance under student aid rules.

-Publication 970