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Lori D.

?? about: which tax form for college student to declare scholarship and ESA disbursement

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Hi-ho everyone,

DH is in the midst of struggling through the tax forms, and I thought I might be able to help if someone else who was BTDT could answer a few questions:

 

Background:

- Both DSs are still dependents; one is 19yo, one is 20yo.

- Neither DS has wages/salary/income to declare.

- DH and I are taking the American Opportunity Education Tax Credit (AOETC) on our form as it reaps the most benefit for us

- By taking the AOETC, we are no longer eligible to also deduct the interest earned on the educational savings bonds, and ESAs

- One DS also got a partial scholarship.

- The bonds are in DH's name, so they get declared on our taxes.

 

My questions:

1. Am I right in thinking that DSs need to each fill out a tax form, even though they have no income, to account for the ESA disbursements and the scholarship money (which all gets counted as income)?

2. And if so, which tax form do we use -- 1040A or 1040 -- and what heading of the types of income do these monies go under (what line of the form)? I have looked over the forms and really can't decipher what these funds would be called... :confused1:

 

Any light you can shed on this murky area for us with tips or info is MUCH appreciated! Thanks in advance! Warmest regards, Lori D.

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When I prepared my dd's tax return, I put the scholarships on line 21 of Form 1040 (other income) and called it Scholarships in Excess of Tuition and Fees.

 

The scholarships in excess of qualified tuition and fees are income to the kids. In calculating the taxable portion, you can allocate payments made by you, your dh, your kids, Grandma, and the family dog to tuition first (before scholarships that are not specifically designated to tuition) in order to maximize the credit.

 

Maybe this link will help you determine the taxability of the ESA distributions. http://www.irs.gov/p.../p970/ch07.html

 

Since the maximum tuition that can be taken into account in the calculation of the credit is $4,000, I would think that the portion of the ESA distributions in excess of that amount would not be taxable, but that is just me speculating. I don't have time to read the information at the link, but I hope it helps.

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When I prepared my dd's tax return, I put the scholarships on line 21 of Form 1040 (other income) and called it Scholarships in Excess of Tuition and Fees...

 

Maybe this link will help you determine the taxability of the ESA distributions. http://www.irs.gov/p.../p970/ch07.html

 

 

THANK you! I think this is what we need! Thanks so very much! :)

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