How do I calculate NJ Tuition Deduction amount (New Jersey Institution of Higher Education Tuition)?How to account for scholarship and grant? Should the tuition deduction exclude the scholarship or grant?

[tvo1983]

I'm working on my tax return and my dependent has 20,000 in tuition and 15,000 in scholarships/grants. For the NJ Tuition Deduction purposes, should I claim the entire 20,000 or only 5,000 in tuition? Looked up all the information from the NJ Department of Taxation and found no guidance. Thanks in advance.

[Hal_Al]

Q. Is the amount entered in "NJ Tuition Deduction" taken from box 1 of 1098-T?

A. No. You must reduce the box 1 amount by any tuition paid for by tax free scholarship amounts (shown in box 5), unless you allocate the scholarship money to other expenses, e.g. room & board or books and computer.  Scholarship amounts allocated to room and board are considered taxable income. 

[tvo1983]

Thanks for the response. If that's the case, how come Turbotax does not flow from federal to state?

[Hal_Al]

Q. If that's the case, how come Turbotax does not flow from federal to state?

Probably because there are too scenarios that could result, in the federal program

[tvo1983]

Thanks. I found a similar question last year, but the response was different and confusing. Meanwhile, NJ offers no clear guidance from the NJ Department. NY has a similar credit and they provide detail guidance.

https://ttlc.intuit.com/community/college-education/discussion/how-do-i-calculate-nj-tuition-deducti...

[AmyC · Accepted solution]

You received a scholarship. If you used it towards your tuition payments, subtract it to find the tuition deduction.

If you used the scholarship toward food and your living expenses, it is taxable income and it is not subtracted to determine the tuition deduction.

If $10,000 tuition and received $8,000 scholarship that went towards classes, you have a $2,000 tuition deduction.

Some people pay tax on the scholarship income in order to claim a larger federal  education credit - if the scholarship can be used other than for tuition.   The IRS has a great brochure that explains how scholarships and tax credits interact.