Claiming Scholarships as Income (to get an Education Credit)
If you're a student, or the parent of a student, you might not think you're eligible for an education credit if the scholarships shown on your 1098-T exceed the tuition payments received by the university.
However, with a certain type of unrestricted scholarship, a student can declare some of it as income and claim an education credit after all.
This video describes how this is done and gives a couple of examples of how this works.
The IRS has no problem with this strategy, and even encourages its use.
CORRECTION: As noted in the comments, unrestricted scholarships that are used for living expenses are considered to be earned income for the purpose of whether or not a dependent has to file a tax return or is liable for "Kiddie Tax." A revised video will be forthcoming.
For a refresher as to how the American Opportunity Credit works, click here: • The American Opportunity Credit (or the sa...
If you'd like to know more about "Kiddie Tax," click here: • What is "Kiddie Tax?"
Additional Resources and Information:
IRS Publication 970: "Tax Benefits for Education": https://www.irs.gov/pub/irs-pdf/p970.pdf
IRS Form 8863: "Education Credits": https://www.irs.gov/pub/irs-pdf/f8863...
IRS Schedule 1 (Form 1040): "Additional Income and Adjustments": https://www.irs.gov/pub/irs-pdf/f1040...
Stackexchange.com: "Voluntarily treat scholarships as taxable income to get AOTC?" https://money.stackexchange.com/quest...
Image and footage credits:
Storyblocks.com
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Intro Music: "Bluesy Vibes" - Doug Maxwell - YouTube Creator Music
Outro Music: "Modern Attempt" - Track Tribe under license from YouTube Creator Music
DISCLAIMER: This video is for educational and informational purposes only. It is not intended to render tax advice or financial advice for individual situations. If you have questions regarding your particular situation, please consult with a qualified tax or financial professional.