BlsdMama Posted August 19, 2014 Share Posted August 19, 2014 Should I be keeping track? We are in the process of figuring out who is paying for what.... Ana received scholarships that cover her tuition, but a grant in the form of a refund meant for living expenses, for books, and associated costs. We're paying for her commute, parking permit, lunch, etc., but we're wondering if it would be better to use the grant for gas than books or something so that we are able to deduct any of our expenses for her college. Quote Link to comment Share on other sites More sharing options...
regentrude Posted August 19, 2014 Share Posted August 19, 2014 nm. Quote Link to comment Share on other sites More sharing options...
8filltheheart Posted August 19, 2014 Share Posted August 19, 2014 We have been paying attention to the same question. From my reading, only scholarship $$ covering tuition and textbooks which are stated as required are not considered taxable income. I don't know about grant $$. I have read numerous conflicting reports as to how the rest is taxed. Everything from allowing $6500 individual deduction and taxed at student rate to entire remainder taxed at unearned income parental rate. We are using an acct this yr to deal with it b/c I have not seen a single source that makes me 100% confident in the answer. (and the latter scenario is just plain ridiculous. That is a killer tax rate. ETA: ds got cash back from his scholarships and we made him put the total in an acct to remain untouched just to pay the taxes if the latter scenario ends up being the case.) Quote Link to comment Share on other sites More sharing options...
Hoggirl Posted August 19, 2014 Share Posted August 19, 2014 http://www.irs.gov/pub/irs-pdf/p970.pdf Here is the link for the applicable IRS publication. Quote Link to comment Share on other sites More sharing options...
8filltheheart Posted August 19, 2014 Share Posted August 19, 2014 http://www.irs.gov/pub/irs-pdf/p970.pdf Here is the link for the applicable IRS publication. When I read that pub, I am definitely :confused1: :confused1: :confused1: :confused1: :confused1: Like I said, we are hiring an acct this yr. I can't figure it out and after reading pages of people talking about it CC, I have given up. Quote Link to comment Share on other sites More sharing options...
G5052 Posted August 19, 2014 Share Posted August 19, 2014 When I read that pub, I am definitely :confused1: :confused1: :confused1: :confused1: :confused1: Like I said, we are hiring an acct this yr. I can't figure it out and after reading pages of people talking about it CC, I have given up. I'm with you. I usually do our taxes and have handled a lot of complicated situations including self-employment, but periodically I hire a particular CPA I know to at least look over everything. She has studied all of the IRS rulings and letters and has more detailed information than I'll ever have. Not cheap, but she's always saved us more than I've paid her with some angle that I missed. This year is simple (dual enrollment still, so Lifetime Learning), but I'll probably be calling her again next summer when I send the first one to college. :confused1: Quote Link to comment Share on other sites More sharing options...
Sunshine State Sue Posted August 20, 2014 Share Posted August 20, 2014 I volunteered this year as a tax preparer. Some of the info below is from our training materials. We are wrestling with this question right now. I suspect a lot has to do with Box 1 on the 1098-T that will come from the school. Which expenses can be claimed: tuition fees paid to the school books (no matter where they were bought/rented) supplies (no matter where they were bought/rented) equipment (no matter where they were bought/rented) - computer is a judgement call You definitely want to keep track of these expenses. About a computer: However, whether an expenditure for a computer qualifies for the credit depends on the facts. An expenditure for a computer would qualify for the credit if the computer is needed as a condition of enrollment or attendance at the educational institution. What cannot be claimed: room and board research travel clerical help equipment and otehr expenses not required for enrollment in or attendance at an eligible educational institution Directly from pages 10-11 of Pub 970: Qualified Education ExpensesFor purposes of the American opportunity credit, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Related expenses. Student-activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. However, expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution. Quote Link to comment Share on other sites More sharing options...
Sunshine State Sue Posted August 21, 2014 Share Posted August 21, 2014 I spoke with the college today, and I think I have a better idea about this. IRS form 1098-T will be provided to the student. Box 1 and Box 2 are key. I was told that because we are out-of-state, Box 1 (Payments received for qualified tuition and related expenses) will be blank and Box 2 (Amounts billed for qualified tuition and related expenses) will be filled in. Not all of the fees are tax deductible (ex. sports fees, student health fees). If the amount in Box 5 (Scholarships and Grants) is less than the amount in Box 2, that is the amount that is paid out of my pocket and is tax deductible. Plus, books, supplies, equipment. If the amount in Box 5 is greater than the amount in Box 2, then I can be taxed on the difference. Minus books, supplies, equipment. So, as much as I would like to pay a portion of the tuition and fees and have the scholarship or grant go towards the room and board, the IRS isn't going to see it that way. No big surprise. :huh: The American Opportunity Credit is a maximum of $2500. The first $2000 I spend towards tuition, fees, books, supplies equipment over the scholarships and grants) will allow me a $2000 credit (IRS form 1040 line 49). The next $2000 I spend allows me 25% credit. In other words, I have to spend $4000 to get the $2500 maximum. If I spend $3000, my credit will be $2250. Form 8863 is used for Education Credits. HTH! If anyone has an older student who attends or attended an out-of-state school, I'd love to verify that 1098-T Box 1 was blank and Box 2 was filled in. Quote Link to comment Share on other sites More sharing options...
Sunshine State Sue Posted August 21, 2014 Share Posted August 21, 2014 If the amount in Box 5 is greater than the amount in Box 2, then I can be taxed on the difference. Minus books, supplies, equipment. Upon further investigation, the school does not have to provide a 1098-T for: Students whose qualified tuition and related expenses are entirely waived or paid entirely with scholarships Quote Link to comment Share on other sites More sharing options...
Kathy in Richmond Posted August 21, 2014 Share Posted August 21, 2014 If anyone has an older student who attends or attended an out-of-state school, I'd love to verify that 1098-T Box 1 was blank and Box 2 was filled in. Yes, that's how it worked on my kids' 1098-T's with out of state private schools & kids on need-based financial aid. Quote Link to comment Share on other sites More sharing options...
8filltheheart Posted August 21, 2014 Share Posted August 21, 2014 Upon further investigation, the school does not have to provide a 1098-T for: Students whose qualified tuition and related expenses are entirely waived or paid entirely with scholarships This is what I have heard. So what does this mean exactly? I'm sure you still need to file. Quote Link to comment Share on other sites More sharing options...
Sunshine State Sue Posted August 21, 2014 Share Posted August 21, 2014 So what does this mean exactly? I'm sure you still need to file. AOC can only be claimed when tuition+fees+books+supplies+equipment > scholarships+grants(+other tax deductible money ie. 529) fees=related expenses (not the sports fees, health fees) Form 8863 has a place for you to check whether or not your student got a 1098-T. You would enter the difference above on line 27. Quote Link to comment Share on other sites More sharing options...
Hunter's Moon Posted August 21, 2014 Share Posted August 21, 2014 I volunteered this year as a tax preparer. Some of the info below is from our training materials. We are wrestling with this question right now. I suspect a lot has to do with Box 1 on the 1098-T that will come from the school. Which expenses can be claimed: tuition fees paid to the school books (no matter where they were bought/rented) supplies (no matter where they were bought/rented) equipment (no matter where they were bought/rented) - computer is a judgement call You definitely want to keep track of these expenses. About a computer: What cannot be claimed: room and board research travel clerical help equipment and otehr expenses not required for enrollment in or attendance at an eligible educational institution Directly from pages 10-11 of Pub 970: You may be able to answer me this: I attend a CC and all of my tuition and fees and books was covered with grants, scholarships, and loans. If box 1 is empty, box 2 is $5565, and box 5 is $2823, I can claim $2742 as paid out of pocket even though those are loans? Quote Link to comment Share on other sites More sharing options...
Tiffnkids Posted August 21, 2014 Share Posted August 21, 2014 Qualified expenses paid for with loans can be claimed for AOC (any qualified expenses not paid for with scholarships/grants or 529/ESA funds can be claimed). That loan money WILL be out-of-pocket when you start paying it back! Quote Link to comment Share on other sites More sharing options...
Sunshine State Sue Posted August 21, 2014 Share Posted August 21, 2014 You may be able to answer me this: I attend a CC and all of my tuition and fees and books was covered with grants, scholarships, and loans. If box 1 is empty, box 2 is $5565, and box 5 is $2823, I can claim $2742 as paid out of pocket even though those are loans? If I understand correctly, your grants and scholarships total $2823 and the tuition and fees total $5565. The loans come out of your pocket and therefore you can claim that money for the tax credit. I am assuming that you are attending at least part-time. You can only get the tax credit for the first 4 years of post secondary education. There are other eligibility requirements and information here. I volunteer with VITA - Volunteer Income Tax Assistance. Locations can be found here. The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $52,000 or less, persons with disabilities, the elderly and limited English speaking taxpayers who need assistance in preparing their own tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals. Quote Link to comment Share on other sites More sharing options...
Sebastian (a lady) Posted August 21, 2014 Share Posted August 21, 2014 FWIW, a friend whose kids have done some dual enrollment with cc mentioned that she took the college tax credit one year using the community college costs. She later regretted having used one of the four years of credit eligibility for what was a relatively low cost year. She wasn't able to claim a much high cost university year for that kid. Quote Link to comment Share on other sites More sharing options...
Kareni Posted August 21, 2014 Share Posted August 21, 2014 Upon further investigation, the school does not have to provide a 1098-T for: Students whose qualified tuition and related expenses are entirely waived or paid entirely with scholarships Yes, in my daughter's four years of college, we never received a 1098-T. Her college considered that their grant covered tuition and that the monies we paid covered room and board. All we were able to claim was the cost of textbooks. Regards, Kareni Quote Link to comment Share on other sites More sharing options...
Kareni Posted August 21, 2014 Share Posted August 21, 2014 This is what I have heard. So what does this mean exactly? I'm sure you still need to file. Oh, yes, we filed. I posted this some time ago, so things may have changed (i.e., the IRS Publication may have been updated). IRS Publication 970 "Tax Benefits for Education" discusses this. Scholarship income that is not used for tuition, books, or some fees is taxable. See page 6 of 88 of Publication 970. There it says, "Form 1040A. If you file Form 1040A, include the taxable amount in the total on line 7. If the taxable amount was not reported on Form W-2, also enter “SCH†and the taxable amount in the space to the left of line 7." Different directions are given for the various tax forms (such as 1040EZ, 1040, etc.). Regards, Kareni Quote Link to comment Share on other sites More sharing options...
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