1098-T with high MAGI MFJ parents

Forum|Forum|2 years ago
March 4, 2024
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We have a full time undergrad student who received a 1098-T. Seems due to MAGI of the parents, there is no AOTC or LLC on the parents return. The student has some internship income ( <4K total) and no scholarships that she used for 2023 tuition. Does she need to file a return, and would she be herself eligible for the credits? (She did not pay the tuition).

SusanY1

Your student would be able to claim the nonrefundable portion of the credit on the tuition paid on her behalf in this case, but it doesn't sound like it would help this year to do so.

If she earns more money in future years so that she is providing more than half of her own support from earned income, she can qualify for the full credit, including the refundable portion.

If the internship was her only income for the year and was considered self-employment income (reported on 1099-NEC) she is required to file and may actually see some benefit from the credit. If the internship income was reported on Form W-2, she should file for a refund of any federal or state tax withholding for which she may be eligible, but she is not required to do so.

There is no fee unless you file with the online versions of TurboTax, so it is probably worth running through the program quickly for her to see if she would benefit from filing.

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Hal_Al

Employee

Q. The student has some internship income ( <4K total). Does she need to file a return?

A. No, if the $4000 was reported on a W-2.

Q. Would she be herself eligible for the credits? (She did not pay the tuition).

A. Simple answer: No. But, it's not because she didn't pay the tuition.

While technically there is a provision that allows your student-dependent to claim a federal tuition credit, from a practical matter it seldom works out. A student, under age 24, is only eligible for the refundable portion of the American Opportunity Credit (AOTC) if he/she supports himself by working. She cannot be supporting herself on student loans & grants and 529 plans and parental support. It is usually best if the parent claims that credit.

If the student actually has a tax liability, there is a provision to allow him to claim a non-refundable tuition credit. But then the parent must forgo claiming the student as a dependent, and the $500 other dependent credit. The student must still indicate that he can be claimed as a dependent, on his return. This is worth up to $2500 (AOTC shifts to all non refundable)