College Education credits

[mrbill]

Client claims her college son. The 1098T has the following - Box 2 (amount billed): $16K. Box 5 Scholarship: $19K. Can my client claim the AOC ? Within the income limits. Thanks,

[ATSMAN]

Client claims her college son. The 1098T has the following - Box 2 (amount billed): $16K. Box 5 Scholarship: $19K. Can my client claim the AOC ? Within the income limits. Thanks,

Depends! Have her get a statement from the school showing payments made in 2015 either by cash/check or loan disbursement. What was the scholarship income applied. Room and board, other fees etc. You need the statement to determine what was actually pay in cal year 2015.

[CVTax]

This might help.... https://www.irs.gov/pub/irs-utl/Pell...04%20pager.pdf

[FEDUKE404]

Dealing with Form 1098-T . . . AGAIN . . .

This topic has been beaten to an absolute pulp on these boards in the past. Suggest you search for those threads.

That having been said: The (useless) Form 1098-T *by itself* would indicate no education credits allowed and possible taxable income.

Of course, once you get the "real" facts as to what was paid (who gives a hoot about "billed"?) and when, and where the scholarship funds were applied. . . .THEN you will have your answer.

FE

[Jiggers]

Of course, once you get the "real" facts as to what was paid (who gives a hoot about "billed"?) and when, and where the scholarship funds were applied. . . .THEN you will have your answer.

FE

I wish it was that easy. You can't believe that number of clients who can't tell me what awas paid for tuition, room & board, books, supplies, etc. Everything charged, no one keeps track at that information, once paid, "who cares?"

And some of the schools are not not providing the detail of accounts, or so my clients say. I believe that the information is available on-line.

And most do not keep track of the scholarships and grants received. Especially those "scholarships" handed out by local organizations.

[FEDUKE404]

Dealing with college costs IS a chore

I wish it was that easy. You can't believe that number of clients who can't tell me what awas paid for tuition, room & board, books, supplies, etc. Everything charged, no one keeps track at that information, once paid, "who cares?"

And some of the schools are not not providing the detail of accounts, or so my clients say. I believe that the information is available on-line.

And most do not keep track of the scholarships and grants received. Especially those "scholarships" handed out by local organizations.

If I implied that it was "easy," then my humblest apologies.

I'm beginning to dread the battles ahead for any client who walks in with a Form 1098-T not unlike I once approached tax returns for an Amway or Tupperware "salesman." It is a constant battle to 1) get the facts/documents and 2) have the client understand the concepts involved. Worst case scenario things can downgrade to. . ."What's the problem, there's all you need on that Form 1098-T !"

I'll save the useless concept of reported amounts "billed" for another Monday. . .

FE

[Jiggers]

If the parents won't get the information, and the 1098T shows more scholarships than tuition, I just add to the kid's return if I do it.

Most of my clients with kids in college make too much money for the credit anyway!

[Super Mom]

My clients always can call the school for a statement or go online. I would tell them I need a statement or according to that form he has taxable income, in that case they are glad to get a statement!

[FEDUKE404]

Other related issue

If the parents won't get the information, and the 1098T shows more scholarships than tuition, I just add to the kid's return if I do it.

Most of my clients with kids in college make too much money for the credit anyway!

What about the smart kids with the taxable (scholarship) income? ?

Same ball of . . . wax .

FE

[Burke]

I have never seen an accredited institution of secondary education NOT have the information online in the last several years. Tell the TP to get it. Usually all they need is the kid's ID and Password to bring it up. Most of the schools I deal with now have it on the bottom or back of the 1098T. They got tired of all the phone calls and having to access it for the taxes. Also because my software changed the way this info is input on a new worksheet, I had my first case ever of a taxable scholarship elected to claim as income. I was surprised to see how much it increased the credit they received.

[FEDUKE404]

swapping qualifying expenses for income ? ?

I have never seen an accredited institution of secondary education NOT have the information online in the last several years. Tell the TP to get it. Usually all they need is the kid's ID and Password to bring it up. Most of the schools I deal with now have it on the bottom or back of the 1098T. They got tired of all the phone calls and having to access it for the taxes. Also because my software changed the way this info is input on a new worksheet, I had my first case ever of a taxable scholarship elected to claim as income. I was surprised to see how much it increased the credit they received.

So you're saying a person with qualifying education expenses can simply "decide" the scholarship funds did not first go toward those qualifying expenses (shown somewhere on Form(s) 1098-T) but instead went to pay the NON-qualifying expenses, such as room and board and thus becoming taxable income? Some income, higher "unreimbursed" qualifying expenses generating education tax credits?

Are you SURE you can do that? ? ? I seem to recall somewhere in the distant past that such an end run was not an option.

Also, could that not become an issue for "who" provided >50% of the student's support ? ?

And for those with the "rich clients" would not the creation of the "phantom income" likely trigger due to the taxable scholarship income some Kiddie Tax (Form 8615) issues for said well-off parents?

Tell us more. . .

FE

[RitaB]

If the parents won't get the information, and the 1098T shows more scholarships than tuition, I just add to the kid's return if I do it.

Most of my clients with kids in college make too much money for the credit anyway!

What about the smart kids with the taxable (scholarship) income? ?

Same ball of . . . wax .

FE

I believe that's what Jiggers meant. If clients cannot or won't provide information to the contrary, he puts the excess of scholarships over billing as income on the kid's return. Seems logical to me, and I do that as well.

[RitaB]

Absolutely

I'm beginning to dread the battles ahead for any client who walks in with a Form 1098-T not unlike I once approached tax returns for an Amway or Tupperware "salesman." It is a constant battle to 1) get the facts/documents and 2) have the client understand the concepts involved.

FE

Totally agree. It's a nightmare to get correct. It would be fine with me if IRS audited every family with a 1098-T. I think they'd find some tax dollars.

[Snaggletooth]

Earned Income

For the following discussion, please ignore the usual problems with billing, paid, timing, etc.

For LARGE scholarships which exceed tuition:

1) If the scholarship/grant is free money, then I simply consider the 1098-T a wash. No benefit.
2) If the scholarship is for work-study programs, where the student actually WORKS for the money,
there is an attractive option described below.

Assume the large scholarship enables the student to claim himself as a deduction. This is possible if the student is working for the money and the scholarship is sufficiently large. Claim the scholarship money as wages earned (in many cases it is not even subject to social security). After claiming std deduction & exemption, whatever is left is usually taxed at a paltry 10-15%. American Opportunity Credit will usually wipe out the tax, and 40% of it is refundable as a payment.

Not very common to run into situations like the above, but it DOES happen, and it will work.

[Burke]

Are you SURE you can do that? ? ? I seem to recall somewhere in the distant past that such an end run was not an option.FE

See Pub 970:

Tax-Free Scholarships and Fellowship Grants


A scholarship or fellowship grant is tax free (excludable from gross income) only if you are a candidate for a degree at an eligible educational institution.

You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received. See examples in Coordination with Pell grants and other scholarships, in chapter 2 and chapter 3.