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February 26, 2023
Question

I did not receive a 1098 form because i used grant money to pay for my tuition. I am trying to apply for the lifetime learning credit. How do I do that through turbotax?

  • February 26, 2023
  • 2 replies
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2 replies

Hal_Al
Employee
February 26, 2023

After answering no, to the question did you receive a 1098-T, answer yes when asked if you qualify for an exception.  That will allow you to enter your information, including tuition and scholarship.

 

But, if you "used grant money to pay for tuition", how do expect to qualify for the Lifetime Learning Credit (LLC). The LLC is a non refundable credit.  It can only reduce the tax your tax liability. 

 

 There is a tax “loop hole” available. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit  (or LLC), 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 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 (AOC). But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.

 

The LLC, in addition to be non refundable, is less generous than the AOC.  It is  20% of tuition paid.  You will need to be in the 12% or less tax bracket  to see a benefit in using the "loop hole". 

 

 

February 26, 2023

Please clarify your question. Are you paying taxes on your grant money? Did the grantor pay tuition directly to your school? Or did you pay your tuition with the money you received from a grant?

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