rbynaker
Level 14
12-06-2019
10:12 PM
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Okay, time out. I answered the question "Should box 1 include amounts paid by scholarships?"
Yes, per the 1098-T instructions, box 1 (of the 1098-T) should include amounts paid by scholarships.
What you use to determine education credits is a completely different question. The total amount paid IS reduced by scholarships (so box 1 minus box 5) when computing credits. There are some exceptions, such as when the scholarship can be properly allocated to non-qualifying expenses (room & board, etc.) In some cases it can be more beneficial to treat the scholarship as taxable income (to the student) while taking the AOTC on the parents return. See Pub 970:
https://www.irs.gov/pub/irs-pdf/p970.pdf
The terms of the scholarship dictate how it is allowed to be spent, you can't just arbitrarily make stuff up.
Rick
Edit: Adjustments to QEE start at the bottom of page 14 of Pub 970.
Yes, per the 1098-T instructions, box 1 (of the 1098-T) should include amounts paid by scholarships.
What you use to determine education credits is a completely different question. The total amount paid IS reduced by scholarships (so box 1 minus box 5) when computing credits. There are some exceptions, such as when the scholarship can be properly allocated to non-qualifying expenses (room & board, etc.) In some cases it can be more beneficial to treat the scholarship as taxable income (to the student) while taking the AOTC on the parents return. See Pub 970:
https://www.irs.gov/pub/irs-pdf/p970.pdf
The terms of the scholarship dictate how it is allowed to be spent, you can't just arbitrarily make stuff up.
Rick
Edit: Adjustments to QEE start at the bottom of page 14 of Pub 970.
