Do I have to submit my 1098-T form even if my tuition was paid by a family member?

[nurrahm]

I graduated from college last year (2024) so I was planning to submit my 1098-T form this year. I didn't think it would affect my tax return at all but after I submitted the form in the TT portal, it said I would owe money. I guess this is because the amount I received in scholarships was greater than the amount that was paid for my tuition last year, so I received some refunds in my student account. But my tuition was paid for by a family member, not myself. Therefore, those returns I received weren't deposited into my account--I never even touched that money. This being the case, am I required to include my 1098-T form when filing? Or am I ok to just leave it out? I just don't wanna end up getting any sort of penalty and owing the IRS.

[Bsch4477]

Qualified education expenses paid by someone else are considered to have been paid by you or your parent if you are claimed as a dependent.  Let us know your situation and the amount in boxes 1 and 5 so we can help you. 

[nurrahm]

My parents no longer claim me as a dependent, but I think they did last year during the semester that tuition was paid.

Box 1: $14,607.00

Box 5: $17,382.00

Edit: Just confirmed that they did in fact claim me as a dependent last year.

[Bsch4477]

What was your income during 2024? Your answer will determine whether you have a filing requirement. Only your parents can claim education credit if qualified by their AGI. 

[nurrahm]

My income was $17, 662.00. I'm not sure what my parents' was though.

[Bsch4477]

You do have a filing requirement. Your return should be made in concert with that of your parents. They can get education credit by giving you more taxable scholarship income while increasing the education expenses they paid. The credit will outweigh the increase in your taxes. Let us know if they need help with that. 

[nurrahm]

They already filed their taxes, so I'm not really sure how that would work.

[Hal_Al]

You say  "they did in fact claim me as a dependent last year".

I assume last year means 2024 (what we're working on now). 

There are two education credits, American Opportunity Credit (AOC) and Lifetime Learning Credit (LLC).  The AOC is very generous (100% of the first $2000 expenses paid and 25% of the 2nd $2000).  The LLC is 20% of tuition paid.  There is a four time limit to claiming the AOC, Since graduation year is typically the 5th calendar/tax year, your parent have probably already claimed the AOC 4 times.  You should verify that with them. 

Using the gimmick of the student reporting some of his scholarship as taxable, so the parents can claim the credit, isn't as beneficial when they can only claim the LLC.  The  taxable scholarship is subject to the "kiddie tax" (the student pays tax at the parent's marginal tax rate).  

You have to do the math to see if this is all worthwhile.  Doing trial tax returns is easier using download TT, rather than online.  You could try this tool, but it has limits https://turbotax.intuit.com/tax-tools/calculators/taxcaster/?s=1

Bottom line: you do need to report, at least $2775 of your scholarship as taxable.  So, yes, you do need to enter your 1098-T.  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. It doesn't matter if a relative paid tuition and/or you never touched the money.