Skip to main content
July 20, 2021
Question

Is there any tac credits I can claim if I have student aid and Pell grants. I need money for housing while in school

  • July 20, 2021
  • 1 reply
  • 0 views
No text available

1 reply

Hal_Al
Employee
July 20, 2021

Simple answer: no.   If you qualified expenses (tuition, fees and course materials) are paid for with tax free grants, you are not eligible for an education tax credit.  But if your "student aid"  is loans, you probably qualify.

 

To use an education credit,  you usually would need to have other taxable income to have a tax liability to take a credit against..

 

There is an (up to ) $1000 refundable education credit available to undergrads, over age 23, who are not dependents of their parent (or anyone else).

 

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 and over 23 ) 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, instead of $6000.