1098-T and Impact on Total Income

[gradstudentwq]

Hello!

I am struggling to figure out how to properly input my 1098-T information without it incorrectly calculating my total income. I think the problem lies in the number I am inputting for "Actual amount paid for tuition." In that field, I am including everything I paid out of pocket and everything I paid for in student loans. However, I am not including merit scholarships that were put towards my tuition.

Because most of my tuition is paid for by my merit scholarship, the amount in Box 5 is higher than the actual amount I paid for tuition (out-of-pocket and loans). My total income at the end of my return is then being calculated as the difference between my scholarships and grants (listed in Box 5) and the actual amount I paid for tuition. In other words, my total income ends up including scholarship money that only went toward my tuition.

How can I correct this? Isn't it true that my total income should only include scholarship money that didn't go towards qualified educational expenses?

Thank you!

[Hal_Al]

From what you described, TurboTax (TT) is doing it correctly. 

Scholarships that pay for qualified educational expenses (QEE - tuition, fees, books and other course materials) is tax free.  Scholarship amounts that exceed QEE is taxable income, on the student’s tax return. Room & board are not QEE.

If box 5 of the 1098-T exceeds box 1, TurboTax (TT) will treat the difference as taxable income, unless you enter additional QEE at books and other expenses.

[NCperson]

@gradstudentwq 

<< Isn't it true that my total income should only include scholarship money that didn't go towards qualified educational expenses?>>  

Yes, this is the same thing as stating that if Box 5 exceeds Box 1, then that difference represents scholarship money that didn't go towards QEE. 

[gradstudentwq]

@Hal_Al 

Thank you for your response! I'm still a little confused, so I'm going to try to give an example to help pinpoint where I'm confused.

Let's say I have a scholarship for $25,000, $5,000 of which isn't going towards QEE. The amount of tuition I'm charged is $30,000, but I'm only actually paying (out-of-pocket expenses and loans) $10,000. The rest of my tuition is paid for by the remaining $20,000 in my scholarship.

In that situation, I would input $30,000 for Box 1, but for "Amount I actually paid," I would input $10,000. Box 5 would be $25,000. TurboTax would then calculate my total income as $15,000 ($25,000-$10,000), even though, I believe, only $5,000 should be added to my total income in this scenario.

What am I doing wrong here? Should I be including the $20,000 from my scholarship that is going toward tuition in the "Amount I actually paid" field? How else do I ensure the total income is correct?

[gradstudentwq]

@NCperson 

Thank you for your response! I'm going to respond with the same message as I did above, because I'm still a little confused. 

Let's say I have a scholarship for $25,000, $5,000 of which isn't going towards QEE. The amount of tuition I'm charged is $30,000, but I'm only actually paying (out-of-pocket expenses and loans) $10,000. The rest of my tuition is paid for by the remaining $20,000 in my scholarship.

In that situation, I would input $30,000 for Box 1, but for "Amount I actually paid," I would input $10,000. Box 5 would be $25,000. TurboTax would then calculate my total income as $15,000 ($25,000-$10,000), even though, I believe, only $5,000 should be added to my total income in this scenario.

What am I doing wrong here? Should I be including the $20,000 from my scholarship that is going toward tuition in the "Amount I actually paid" field? How else do I ensure the total income is correct?

[NCperson]

@gradstudentwq let's make this simpler

1) what was reported in Box 1? that is the schools reporting of all QEE.  Trust that it is correct

2) what else did you spend on educational expenses that was not purchased through the school? Normally this is only books and a computer but could be other expenses required for class.

3) what is reported in Box 5? 

the loan payments don't have any inpact.  I think that is what is confusing you.  

let's start there.  It'll make this easier to explain .

[Hal_Al]

I agree with @NCperson , we need clarification on your actual numbers; what's in boxes 1 and 5.  Loan payments and out of pocket payments are not relevant. What matters is how much qualified expenses you had and how much of those expenses you allocate to the scholarship.   Room & board are not qualified expenses for either tax free scholarship or a tuition credit. 

Here's a post on the five main points on the  1098-T:

https://ttlc.intuit.com/community/college-education/discussion/re-what-do-i-do-with-form-1098t/01/37...

[gradstudentwq]

@NCperson 

@Hal_Al 

1) Box 1 is $30,000.

2) $0.

3) Box 5 is $25,000.

I think I'm confused because I've been checking the "I paid a different amount than shown in Box 1" box since part of my tuition was covered by my merit scholarship. Should I not be checking that box?

Thank you!!

[NCperson]

@gradstudentwq just key in the 1098-T just as it is presented to you.  None of scholarships will be taxable because Box 1 exceeds Box 5.  it's that simple.  do not check that box.

Scholarships are TAXABLE to the student.  Many misunderstand that. 

But the IRS permits that scholarship income to be reduced dollar-for-dollar by Qualified Educational Expenses (box 1). 

so when TT asks, you have $30,000 of tuition and $25,000 of scholarships.  there should be an Lifetime learning credit of up to $1,000. (20% * $5,000)