Your College Scholarship Might Be Costing You Tax Credits
College tuition has become one of the biggest sources of debt for those who choose to further their education at a University. It is the burden that one takes on for improving their knowledge and skill set to further their career. A way to reduce the amount of tuition that you pay is to apply for certain scholarships and/or grants. This is a great way to reduce the amount of student loans to pay off down the road.
However, when it comes to scholarships and grants, they may be reducing the amount of education credits that you are receiving on your tax return. Education credits are based upon the amount of tuition that was actually paid. Thus, tuition that was paid with scholarships and grants does not count. When reporting Form 1098-T (tuition tax form) you will report both the total tuition and total scholarships/grants. The amount that can be used towards education credits is tuition-scholarships/grants. The American Opportunity Credit is the most beneficial education credit out there. This credit can be up to $2,500 for students in their first 4 years of college. The amount of credit that you will receive is based upon the amount of eligible tuition expenses that you have. Many times students with scholarships will not be able to maximize this full credit, because their tuition expenses just aren’t enough to do so.
So, how do we get the full education credits that are available?
Are you a parent that claims your child as a dependent and they have a scholarship or grant?
We have strategies available to maximize that credit for you and get you a larger refund. If you are someone in this situation and have yet to file your tax return, please contact our office before doing so. If you have already filed your tax return, we can look into amending your tax return if we think changing things will benefit you.
Don’t leave an extra refund out there, call 414-545-1890.