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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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My daughter/dependent had $1901 more in box 5 than box 2 on

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My daughter/dependent had $1901 more in box 5 than box 2 on her T-1098. We don't qualify for tuition credit obviously, but what do we do with the $1901? Books were not added into the box 2 amount, nor were any supplies. H & R Tax Cut has a place to enter scholarships rec'd, but it asks for those that "I" rec'd, not my spouse or dependent, and it says nothing about offsetting the scholarships with tuition and expenses. Do I ignore these issues on my return and have my daughter claim the taxable portion of the scholarship on her return?

If your daughter is your dependent - she may not claim a credit for educational expenses.

Expenses to purchase books are not reported on the form 1098-T - you need to have separate receipts for these expenses.

Your are eligible to deduct educational expenses if your modified adjusted gross income (MAGI) is below certain level.

 

For 2009, the amount of your Hope or lifetime learning credit is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $50,000 and $60,000 ($100,000 and $120,000 if you file a joint return). You cannot claim a credit if your MAGI is $60,000 or more ($120,000 or more if you file a joint return).

 

For Tuition and Fees Deduction

If your modified adjusted gross income (MAGI) is not more than $65,000 ($130,000 if you are married filing jointly), your maximum tuition and fees deduction is $4,000. If your MAGI is larger than $65,000 ($130,000), but is not more than $80,000 ($160,000 if you are married filing jointly), your maximum deduction is $2,000. No tuition and fees deduction is allowed if your MAGI is larger than $80,000 ($160,000).

 

You may see for reference IRS publication 970 - http://www.irs.gov/pub/irs-pdf/p970.pdf - this publication was just recently updated - please verify if have an updated version.

Please be aware that there is a new educational credit - American Opportunity Credit - you may find details in the publication

Customer: replied 6 years ago.
In Pub 970 I couldn't find where to put box 2 info or box 5 info. Only online have I found any reference to the need to subtract box 5 from 2. This results in $1901 higher scholarship vs. tuition. After approx. $700 for books and supplies, this appears to leave us with $1201 in taxable scholarships for my daughter. Do I include that with my US1040?, or does my daughter include the $1201 on her return? I understand it gets included in Line 7 with the SCH written to the left.

If your daughter is your dependent - she may not claim a credit for educational expenses.

Only you may claim educational expenses for your dependent daughter.

 

You may claim only expenses that you paid from after tax funds - these included those paid with student loans.

The form 1098-T may not give you the full information - and you need to verify with other documents.

The box 2 on the form 1098-T reports "Amounts billed for qualified tuition" - you need to verify if that amount was actually paid with other documents. Also that amount may include expenses for previous and following year that are billed in 2009 - you only may deduct those that were actually paid in 2009.

The box 5 reports the amount of "Scholarships or grants" - that amount is subtracted from the amount paid if you are not required to pay it back (that is correct in most situations but not always)

 

Let me know if you need any help.

 

Customer: replied 6 years ago.
I had a positive amount of scholarships/grants (for my daughter) after subtracting box 5 from box 2 (T1098). This is reportable income. My question ended up being where do I report that income? The answer (2nd) came back that I didn't qualify for tuition credit. I already knew that. The first answer didn't tell me where to report the T1098 numbers... My question remains where do I report that income? On my return, or my daughters? Seeing that the question regarding scholarships uses the term "your" scholarship, I went ahead and reported it on "her" (my daughters) return as box 5 minus box 2 (taxable amount) minus books and supplies for an ammended taxable amount of $1197 included in Line 7 with SCH written in to the left... If this is wrong, let me know.

If scholarship is taxable - it is reported on the recipient's tax return - the recipient of the scholarship is your daughter - not you - so it would be reported on her tax return.

I might use "your" as a generic term - sorry for confusion.

 

To determine the taxable portion of the scholarship - use the worksheet in IRS publication 970 page 6 - http://www.irs.gov/pub/irs-pdf/p970.pdf

 

Also see on the next page how to report taxable portion of the scholarship - depending on which form you are using:

If you file Form 1040, include the taxable amount in the total on line 7. If the taxable amount was not reported on Form W-2, also enter "SCH" and the taxable amount on the dotted line next to line 7.

 

Let me know if you need any help.

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