GI Bill, Pell Grant and Scholarships/Grants

[a_ramirez08]

I have received %100 tuition from my GI Bill as well as Pell Grant money this year. To my understanding, Box 1 of my 1098-T is what has been paid and Box 5 just shows the Pell Grant money I have received. In the section that states "Veterans' Education Benefits" should I input the amount in Box 1 since my tuition was covered 100%? If this is the case, then do I need to enter my Pell Grant as income somewhere in my return?

[DDollar · Accepted solution]

If you received a Pell grant, you won’t include the grant amount in your federal taxable income unless you used the funds for unapproved purposes.

Generally, for the Pell grant to retain its tax-free status, you must be a degree candidate at the college and only use the funds to pay for tuition, fees, books, supplies and equipment. However, if you use the funds to pay your room and board or even school-related travel expenses, then you must include the portion of the grant you use to pay these expenses in taxable income.

To report a Pell Grant (or portion thereof) that is taxable:

• Go to Federal Taxes>   Wages and Income

• Scroll to the Less Common Income section and choose Miscellaneous Income (the last choice) 

• Choose Other income not already reported on a Form W-2 or Form 1099

•  Answer Yes on the Other Wages Received screen

• Continue past Wages Earned as a Household Employee and Sick or Disability Pay

•  Answer Yes on the Any Other Earned Income screen

•  Choose Other on the Enter Source of Other Earned Income screen

•   Enter your grant information on the Any Other Earned Income screen.

This will report your scholarships on line 7 of your Form 1040, and you will not be subject to Self Employment Tax.