My daughter received a 1098T I claim her as a dependent, how exactly should I proceed?

Forum|Forum|11 months ago
April 12, 2025
1 reply
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She's our dependent and doesn't have income. when I go to the section asking who was the student 2024 I selected her name and went through the form until I got a note that to claim her income from scholarship she'll need to file her own tax.

what did I do wrong? we're not trying to get her to claim.

should I enter the 1098T using my name or my husbands? how do I claim?

TurboTax Home & Biz Windows

AmyC

Employee

I am going to assume box 5 scholarships are bigger than box 1. If you qualify for an education credit, that is the first goal. You cannot claim the credit if your MAGI is over $90,000 ($180,000 for joint filers). The first question is do you qualify for an education credit:

Yes, Income allows the credit:

Enter the 10998-T tuition of $4000 on your return and everything else blank.
Enter the 1098-T on the students return but take out $4000 from box 1 (since it is on your return).

No, Income does not allow the credit:

the 1098-T is not entered on the parent's return
the 1098-T is entered on the student return

Does the student need to file a tax return is the next question. Take this quick quiz, Filing requirement.

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Lucy22728Author

Thank you for your reply! yes joint filers and we do qualify, I'm still confused so should I just enter $4000. on box 1 and leave everything else blank even though the numbers are different?

The actual form Box 1-$2,320 Box 5- $4,810 Box 7 and 8 is checked.

she also received 1099-misc $750 that can not be added when I searched the form it only gives the option to choose my name or my husband's. Please help!

Hal_Al

Employee

You do not have $4000 of qualified expenses.

So, you enter the 1098-T, on your return, with $2320 in box 1. You can add any book or computer expenses to that amount (but not more than $4000 total). Leave box 5 blank (or enter 0).

On her return, enter 0 in box 1 and $4810 in box 5.

You cannot report her 1099-MISC income or her taxable scholarship on YOUR return. She is required to file a return, based on this income.

What did she do to get 1099-MISC income? That determines how she has to enter it?

______________________________________________________________________________________________

What's going on here?

There is a tax “loop hole” available to claim an education credit, for the parents of students on scholarship. 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 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.

The IRS actually encourages use of this technique. From the form 1040 instructions: “You may be able to increase an education credit if the student chooses to include all or part of a Pell grant or certain other scholarships or fellowships in income. For more information, see Pub. 970, the instructions for Form 1040 and IRS.gov/EdCredit". PUB 970 even has examples of how to do the “loop hole”.