Dep Student box 5 of 1098T bigger than box 1. Possible taxable scholarship income ...based on that 1098T goes on my return not parents correct? Box 1 $9501, Box 5 $11,000

Forum|Forum|5 years ago
March 4, 2021
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I have under $400 in w2, capital gains and 1099int income. If this changes the situation. Difference box 1 to 5=$1499 ..So $1499 plus under $400 =$1899 Box 7 (Jan-Mar) was checked.

TurboTax Deluxe Online

Hal_Al

Employee

It depends on how much capital gains and 1099-INT income you have.

None of your income goes on your parent's return. A dependent child must file a tax return for 2020 if he had any of the following:

Total income (wages, salaries, taxable scholarship etc.) of more than $12,400 (2020).
Unearned income (interest, dividends, capital gains, unemployment) of more than $1100.
Unearned income over $350 and gross income of more than $1100
Household employee income (e.g. baby sitting, lawn mowing) over $2100 ($12,400 if under age 18)
Other self employment income over $432, including money on a form 1099-NEC

Hal_Al

Employee

There is a tax “loop hole” available. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), as income on his return. That way, the parents (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship. You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.

Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.

Books and computers are also qualifying expenses for the AOC. So, extending the example, the student had another $1000 in expenses for those course materials, paid out of pocket, she would only need to report $5000 of taxable scholarship income.