Confused on "Did Your Aid Include Amounts Not Awarded for 2021 Expenses?"

[SusanEM]

I am unsure on how I should answer the questions "Did You Pay for Room and Board with a Scholarship or Grant?" and "Did Your Aid Include Amounts Not Awarded for 2021 Expenses?". I have excess from my scholarship, some of which goes to tuition, but some of the awards are specifically meant for living expenses and not tuition and supplies. I'm not sure what is meant by "expenses", and if it does just mean tuition, then wouldn't I answer yes to both of these questions? In which case I'm not quite sure how to split my rewards between the two. But I am also not sure if '2021 expenses' is referring to specifically that year, because the other descriptions discuss amounts from other years, and, as far as I know, my form is accurate to 2021. The semantics of it is tripping me up

[Hal_Al · Accepted solution]

@SusanEM  said  "I have excess from my scholarship, some of which goes to tuition, but some of the awards are specifically meant for living expenses and not tuition and supplies".

Your situation may best be explained by example. You have $5000 in box 1 of your 1098-T and $7000 in box 5.  The stipulation in your scholarship is that $4000  must be used for room & board (living expenses). When TT asks "Did You Pay for Room and Board with a Scholarship or Grant?", you should answer yes and enter $4000.  $4000 of your scholarship will then be treated as taxable income.  But that means that $2000 of the tuition ($5000 -3000 from scholarship), can be used to claim a tuition credit*.

Q. I'm not sure what is meant by "expenses"?

A. That "expenses" are anything except the qualified expenses  for the tuition credit (tuition, fees, books and computers). It includes food, lodging, transportation, clothing, recreation or even your spring break trip.

You can ignore the question "Did Your Aid Include Amounts Not Awarded for 2021 Expenses?", unless you know for a fact that some of the box 5 money was meant to pay either 2020 or 2022 expenses.

*It takes $4000 of tuition to get the maximum American Opportunity credit (AOC).  To maximize the AOC, you can claim $6000 (instead of $4000)of your scholarship was used for living expenses (and is therefore taxable), freeing up $4000 to be allocated to tuition and the AOC).