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nepi
Level 1

1098-T expenses do not reflect an undergraduate to graduate student transition

Hello! Please help, I am so lost. I graduated from undergrad in December of 2019. I started graduate school at the same university January 2020. So, I went from undergraduate student to graduate student in a month.

 

In November of 2019 I was billed my grad school tuition ($5390) and credited my graduate assistantship grant ($5390) on the same day.
My 1098-T shows that I paid $14,065 (Box 1) in tuition and received $17,859 (Box 5) in scholarships and grants. I attended this school all year and Box 9 was not checked as I was not officially a grad student yet. 


When I enter my 1098-T into turbo tax it is showing up as income, but it also is asking “Was any of the scholarship income not designated to pay 2019 education expenses?” I’m not sure what to answer here.

Do I answer yes and enter $5390 in reference to my grad school spring 2020 grant or answer no? If I answer yes, how will this affect me answering my 1098-T questions next year? 

So sorry to sort of ramble here, I just desperately need help with this one question as it makes a huge difference with the amount I’ll owe. 

2 Replies
Hal_Al
Level 15

1098-T expenses do not reflect an undergraduate to graduate student transition

Q. How do I answer “Was any of the scholarship income not designated to pay 2019 education expenses?”

A. You answer no. Although the $5390 was for the first term in 2020,  it was billed and paid (by scholarship) in 2019.  It is a wash, so it doesn't matter.

The difference between box 5 and box 1 is taxable, unless you have other offsetting expenses, typically books and other course materials. See below for an option.

_________________________________________________________________________

There is a tax “loophole” available. The student reports all his scholarship, up to the amount needed to claim the American opportunity credit, as income on his return. That way, the parents  (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship.  You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.

Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.

 

 

 

Carl
Level 15

1098-T expenses do not reflect an undergraduate to graduate student transition

As you work through the education section pay attention to the *EXACT* wording of each screen. Some screens ask if you were an undergraduate on Jan 1 of the tax year. You'd answer YES to that of course.

Other screens ask if you were an undergraduate on Dec 31 of the tax year. You'd answer NO to that of course, since you graduated before Dec 31 of the tax year.

Remember, on Dec 31 2019/Jan 1 2020 you were no longer an undergraduate. Period.

 

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