Which year should be used for qualified expenses for american opportunity tax credit

Forum|Forum|3 years ago
February 4, 2023
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I have a dependent college student who lived on campus for Spring 2022 semester.

The bill is sent in November 2021, made up roughly of $6000 room and board and $5000 tuition and fees.

Also in November2021, I paid $4500 out of pocket

In January, 2022, financial aid was applied to the account consisting of $5000 in scholarships and grants and $1500 from a student loan.

So I'm trying to determine which year the $5000 in tuition and fees should be considered as being paid.

I thought that scholarships and grants were supposed to be applied to tuition and fees and since the financial aid didn't apply until January, it would be considered as payments received in 2022 (box 1 of the 1098-T).
It appears the university has counted it against 2021.

Which is the correct year for this?

Not A Product Question

Hal_Al

Employee

In your case, either one is correct. If the school hasn't specifically applied certain funds to certain expenses, you are free to allocate them for the best tax benefit.

Since your $4500 out of pocket is enough to claim the maximum American Opportunity Credit, it appears claiming it for 2021 is the best choice; particularly since the 2021 1098-T appears to document that.

The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly your student has taxable scholarship income.

If you claim the tuition credit, you do need to report that you got one or that you qualify for an exception (the TurboTax interview will handle this)

You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T.