1. 1098-T Box 2 (Amounts Billed) is equal to Fall 2014 Qualified Tuition Expenses + Spring 2015 Qualified Tuition Expenses.
2. 1098-T Box 5 (Scholarships) is equal to Fall 2014 Scholarship Amount.
This creates the illusion that I am eligible for the American Opportunity Tax Credit of $2500 as Box 2 is far greater than Box 5.
From Turbo Tax:
"Other Scholarships/Grants
…
Please include here any scholarship income not yet entered that was designated to offset education expenses reported on this year's tax return.
For example, if you received scholarship income in 2015 before you file your 2014 tax return that was used to pay your 2014 tuition, enter that scholarship income here. You will not include it on your 2015 tax return although it may appear on your 2015 Form 1098-T."
Also From Turbo Tax:
"Scholarship Income Not Allocable to 2014
Scholarship income must reduce qualified education expenses for each period of study that assistance is allocable to. However, sometimes scholarship income is not received at the same time education expenses were paid. This can cause your scholarship income to be overstated in one year and then understated in another year. If you received scholarships or grants in 2014 for expenses reported in a year other than the current year, enter an amount here to reduce your scholarship income amount. You will need to include that same amount as scholarship income in the tax year in which the education expenses are actually reported.
For example, in 2013 you received a 1098-T with $4,000 for your fall 2013 expenses which you reported on your 2013 tax return. In 2014 you received a 1098-T that included tuition expenses of $6,000 and $10,000 of scholarship income. $4,000 of the scholarship was actually for your 2013 expenses. You will enter $4,000 here to reduce your scholarship income to $6,000 for 2014. You may also need to recapture any education credit or deduction taken in 2013 that would have been disallowed in 2013 due to the additional $4,000 of scholarship income allocable to 2013 education expenses."
I understand that the 2015 1098-T will contain Scholarship amounts in Box 5 used to pay Spring 2015 tuition in December 2014. What I’m not sure of is if I should take the American Opportunity Tax Credit on my 2014 return and then pay it back when filing my 2015 return. Or, if I should estimate what will appear on the 2015 1098-T on my 2014 return and not take the American Opportunity Tax Credit. I’m sure that my estimate would be exact but that’s not 100% guaranteed. Also, not taking the credit will trigger taxable income for my child for which the education expenses applied as approximately $5000 in Scholarship money exceeded qualifying Tuition, Fees, and Books and was used to pay for Room and Board.
I’m not looking to make money this year that I have to pay back next year. I’m just trying to follow the letter of the law.
As a side note, if I would have truly qualified for the American Opportunity Tax Credit, it’s not clear to me if I could have taken it anyway as we paid for extra expenses with a UGMA which is in my child’s name. Does anyone know if qualifying educational expenses paid for with a UGMA will allow the person claiming the dependent on their tax return to take the American Opportunity Tax Credit. This won’t apply for this year but just wondering for possible future years and other kids. There seems to be conflicting data when I search the web, even the IRS web site.
