100% scholarship tax question (room and board)

[renee7777]

My daughter received a presidential scholarship that pays 100% of her tuition cost and also includes the cost of housing at the dorm.  The dorm cost is $2900 and a scholarship is awarded for that exact amount and listed at the bottom of her balances under grants/scholarships. It is also listed under box 5 on her 1098T.

My question is does taxes have to be paid on that $2900 scholarship considering her presidental scholarship awarded her that to cover the cost of the dorm?  (I ask because I know that room and board is not considered a qualified expense and yet I don't believe it should be reported as taxable income because the school pays for it.

I hope that makes sense

[Hal_Al]

Q. Do taxes have to be paid on that $2900 scholarship considering her presidential scholarship awarded her that to cover the cost of the dorm?

We need to re-word the question. 

Q. Is that $2900 considered taxable income, because it was used for non qualified expenses ("room"), even though the school paid for it.

A Yes. The fact that it was reported in box 5, of the 1098-T, confirms it as so. But it will probably not get taxed, unless she has sufficient other income.  Taxable scholarship is treated as "earned income" for purposes of calculating a student-dependent's standard deduction (earned income + $400) and her filing requirement. If that is her only income, she does not even have to file a tax return. 

[renee7777]

well, regarding her "sufficient other income" I think the 1098T might be wrong....it has to be....and if I have to report these numbers, she is SCREWED.

She went to school full time last year (spring and fall),  tuition for spring was $8456 and fall was $8946 for a total of $17,402 for both semesters total

Her grants and scholarships for both semesters equalled $17,122

Box 1 on her 1098 only says $5963!  ....what?!  I dont even know how they came up with that number! Box 4 that says adjustments made for previous year is NOT checked, box 6 is not checked (adjustments for scholarships)

Box 5 is right on the money, $17,122

What the heck do I do? will the school even correct it?

[Hal_Al]

Box 1 never includes room & board (dorm), so from what you describe there is nothing to correct. 

[renee7777]

Her grants are around $17,000 and that is for BOTH semesters and is listed correctly on the 1098

Her tuition for BOTH semesters is around $15,000 and yet only ONE amount appears to be listed on box 1, so I don't understand how you think it's correct? 

Her dorm cost per year is only $2900

so what you're telling me is it's okay for them to put both semester totals for the grants but only one semester of tuition, even though she had two tuitions in that year

(I'm not even asking about room and board anymore...I just want to know how I can make the 1098 agree with the financial side of what the school says was paid out for tuition)

[Hal_Al · Accepted solution]

Q. I just want to know how I can make the 1098-T agree with the financial side of what the school says was paid out for tuition?

A. Yes, you can do 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. In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid. You will also reach a screen that allows you to adjust the scholarship amount for "amounts not awarded for 2023 expenses".

Or if you find it easier, just change the numbers in boxes 1& 5 to what your records show. The 1098-T that you enter in TT is not sent to the IRS.