1098T Zero entered in Box 1

[dansole26]

Hello,

My son graduated school in may of 2023. Any payment and charges were payable in December 2022 for the the final Spring 2023 semester.

I received our 2023 1098-t with a zero balance in box 1 because any activity that was placed in the account was in December 2022 and then in box 5 there was the grant figure (pretty large). It makes it seem as though he was given cash and he needs to pay taxes on all of box 5.

I understand that  financial aid which exceeds education expenses (Tuition, Books & Supplies) is taxable income.

That number should be approximately $5K. I want to add that to my son's taxes since he has been working since July and will be filing a tax return. 

What form do I use in turbo tax to include that in his taxes.

If I'm forced to use the 1098t form in turbo tax what do I do?

Thanks, btw your responses from last year helped alot

[AmyC]

If you did not claim the tuition paid in December on last year's return, then you can use it now.  Tuition paid for the first 3 months of the next year also qualify, See page 12, What Expenses Qualify at IRS Publication 970, Tax Benefits for Education..

The income can be reduced by books and other expenses in 2023 as well.

The 1098-T will go on your son's return along with the expenses allowed to create his taxable income. The 1098-T will not go on your return.

[dansole26]

Thank you.

Would I be able to just add the $5k to schedule 1 additional Income under "Scholarship and fellowship grants not included on form w2" ?

[Hal_Al]

Q.  Would I be able to just add the $5k to schedule 1 additional Income under "Scholarship and fellowship grants not included on form w2" ?

A. The proper way to enter it, in TT, to get it to line 8r of Schedule 1, is to enter the 1098-T. Instead of 0 in box 1, you enter the amount that was applied to the account in December 2023.  So now, the difference between box 5 and box 1 should be about that $5000.  Or,  you can just adjust the box 5 amount to the net taxable amount.

: 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.

[Hal_Al]

@AmyC  said "If you did not claim the tuition paid in December on last year's return, then you can use it now."

I think she is suggesting the student can claim a tuition credit for 2023 and I agree.  But, be aware you can only claim the American Opportunity Credit (AOC) 4 times as an undergraduate. Since graduation year is usually the 5th calendar year, the parents may have already claimed the AOC the maximum 4 times. 

The alternate Lifetime Learning credit (LLC) is not as generous as the AOC and the scholarship loop hole technique* may not pay off with the LLC.

* There is a tax “loop hole” available. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), 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.