Question

Education

Forum|Forum|6 years ago
February 19, 2020
1 reply
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My daughter received a scholarship that is half of what I paid for tuition. Where is the box/field to enter the amount I paid in so that i can get the tax break on it?

Hal_Al

Employee

If she is your dependent, enter her form 1098-T, on your tax return, even though the form is in her name. The amount you paid is (usually) already included in box 1 of the 1098-T. if not, at the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid. Add what you paid to the scholarship amount paid, in 2019. Later, you can enter the cost of books and other course materials that either you or she paid for.

Hal_Al

Employee

Be advised, if what you paid was less than $4000 (the amount needed to get the maximum credit), there is a tax “loophole” available. The student reports all his scholarship, up to the amount needed to claim the American opportunity credit, 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 $3,000 in box 5 of the 1098-T and $6,000 in box 1. At first glance he/she has only $3000 of qualified expenses. But if she reports $1000 as income on her return, the parents can claim $4000 of qualified expenses on their return.