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ocolorama
New Member

Education Expenses - Tuition vs Other Expenses in interview detail

Working on Education expenses. I'm currently on "Enter (name) Education Expenses" page. I previously entered my 1098-T box 1 amount of $9095 which shows as "Tuition and Enrollment Fees".  I see "Room and Board" as another line item, so based on my understanding that the 1098-T does not include room and board, I was going to enter the appropriate amount ($3532) based on my detailed billing statement. It appears that these values will be added to come up with a total education expense. So, in my case, if I add the room & board amount of $3532 to the 1098-T amount of $9095, the sum exceeds the grand total which I paid to the university last year ($9468). That is leading me to believe there is more than just "tuition" in my 1098-T amount. Am I interpreting this incorrectly?   

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5 Replies
KrisD15
Expert Alumni

Education Expenses - Tuition vs Other Expenses in interview detail

I don't know what you paid to the school, but Box 1 on a 1098-T does NOT include Room and Board. It only reports what was PAID as tuition and fees to the school. 

Box 5 reports any scholarships that posted in 2022.

 

Room and Board would only be relevant if you took a 529 Distribution and entered a 1099-Q from that distribution. 

 

Tuition expenses, as well as books and supplies (books and supplies would not be listed on the 1098-t unless they were purchased directly from the school, not just the bookstore) may be used to offset a scholarship (make a scholarship tax-free) OR for an education credit. 

 

Room and Board cannot be used for a credit and cannot make scholarships tax-free, but CAN make a 529 Distribution tax-free. 

 

Pub 970 explains much more

 

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ocolorama
New Member

Education Expenses - Tuition vs Other Expenses in interview detail

I listed the total amount paid to the school - $9468.  It's not much more than Box 1 - $9095. I understand that Box 1 isn't supposed to include room & board. (as I stated). That's why I am reaching out to try to understand why the 1098-T shows what it does and how to proceed with these expenses. Should I change the amount I enter for the 1098-T? Something is wrong somewhere!

Hal_Al
Level 15

Education Expenses - Tuition vs Other Expenses in interview detail

Not everything you paid to the school is a Qualified educational expense (QEE). The extra $373 (9095 - 8468) is most likely fees (e.g. student activity fee) that don't qualify.  Unless you know otherwise, don't change the box 1 amount when you enter the 1098-T.

 

Unless you entered a 1099-Q (529 plan distribution) earlier, you usually don't get an  entry point for room and board (R&B).  Even if you enter R&B,  TT will not use any of  it to claim the education credit.

 

If you entered scholarships, TT will ask how much of the scholarship was used for room and board.  Be sure you didn't enter R&B there (unless you want that much of the scholarship to be taxable (to the student, not you)

ocolorama
New Member

Education Expenses - Tuition vs Other Expenses in interview detail

Hi @Hal_Al ,

I did also enter a 1099-Q from my 529 and that's why Room & Board is listed. I'll try to ask my question in a different way. What I'm trying to understand is shouldn't the total amount I spent ($9468 in my case) equal the *sum* of:

tuition & fees  (used 1098-T box 1 of $9095 in my case),  

Books ($0 in my case)

Other Books ($132 in my case)

Room and Board ($3532 in my case)

Computer Software? ($85 in my case)?

 

So using my numbers: 9095 + 132 + 3532 + 85 = $12844 which exceeds the total amount I paid ($9468). How can this be if 1098-T amount is only "tuition and fees" by definition? That's what I'm trying to understand... Apologies in advance if I have miss interpreted something. 

 

 

 

 

room & board ($3532), plus books, etc.?

Hal_Al
Level 15

Education Expenses - Tuition vs Other Expenses in interview detail

In taxes, there are two definitions of Qualified educational expense (QEE). There's QEE for claiming a tuition credit and there's QEE for claiming an exclusion of the 529 distribution earnings.

 

Yes, QEE is  9095 + 132 + 3532 + 85 = $12844, if you're asking about the 529 plan.  It's generally only $9095 if your asking about the tuition credit And that's why only $9095 is shown in box 1 of the 1098-T.  

 

Q. So using my numbers: 9095 + 132 + 3532 + 85 = $12844 which exceeds the total amount I paid ($9468). How can this be if 1098-T amount is only "tuition and fees" by definition? 

A. The usual explanation is that the scholarship amount in Box 5 of the 1098-T covered the difference.  Other than that, I don't think anybody here is going to be able to explain your unbalanced bookkeeping. 

 

You are entering numbers in TurboTax to claim the tuition credit and/or the 529 earnings exclusion. TurboTax can do that, but be forewarned, it can get messy.  It helps if you  know the expected output.

___________________________________________________________________________________________

You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. You also cannot count expenses that were paid by tax free scholarships. You cannot double dip! 

On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution." 

__________________________________________________________________________________________

Qualified Tuition Plans  (QTP 529 Plans) Distributions

General Discussion

It’s complicated.

For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". The distribution will be reported on IRS form 1099-Q. 
The 1099-Q gets reported on the recipient's return.** The recipient's name & SS# will be on the 1099-Q.
Even though the 1099-Q is going on the student's return, the 1098-T should go on the parent's return, so you can claim the education credit. You can do this because he is your dependent.

You can and should claim the tuition credit before claiming the 529 plan earnings exclusion. The educational expenses he claims for the 1099-Q should be reduced by the amount of educational expenses you claim for the credit.
But be aware, you can not double dip. You cannot count the same tuition money, for the tuition credit,  that gets him an exclusion from the taxability of the earnings (interest) on the 529 plan. Since the credit is more generous; use as much of the tuition as is needed for the credit and the rest for the interest exclusion. Another special rule allows you to claim the tuition credit even though it was "his" money that paid the tuition.
In addition, there is another rule that says the 10% penalty is waived if he was unable to cover the 529 plan withdrawal with educational expenses either because he got scholarships or the expenses were used (by him or the parents) to claim the credits. He'll have to pay tax on the earnings, at his lower tax rate (subject to the “kiddie tax”), but not the penalty.

 

Total qualified expenses (including room & board) less amounts paid by scholarship less amounts used to claim the Tuition credit equals the amount you can use to claim the earnings exclusion on the 1099-Q. 
Example:
  $10,000 in educational expenses(including room & board)

   -$3000 paid by tax free scholarship***

   -$4000 used to claim the American Opportunity credit

 =$3000 Can be used against the 1099-Q (on the recipient’s return)

 

Box 1 of the 1099-Q is $5000

Box 2 is $2800

3000/5000=60% of the earnings are tax free; 40% are taxable

40% x 2800= $1120

There is  $1120 of taxable income (on the recipient’s return)

 

**Alternatively; you can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. Again, you cannot double dip!  When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records, in case of an IRS inquiry.

On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution." 

***Another alternative is have the student report some of his scholarship as taxable income, to free up some expenses for the 1099-Q and/or tuition credit. Most people come out better having the scholarship taxable before the 529 earnings. 

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