I paid the difference between cost of Spring semester tuition and scholarship in December. Now scholarship shows up as income.

[ductperson]

My son's spring semester cost $20k. I paid $13k in December 2022 but his scholarship for $7k showed up in 2023. His 2023 1098-T shows his scholarship but not that I paid $13k for the semester.  Now the scholarship is showing up as income even though the school paid it to itself.  How do I show that we did not make money on the scholarship?  His 2022 1098-T shows the payments I made for both Fall and Spring semesters.

[AmyC]

I believe you are saying box 5 is greater than box 1 which is causing a taxable income that is incorrect. The box 5 amount is irrefutable. Let's think of ways to use this money and how it affects each of you. Don't confuse a little student income with a huge tax credit.

• If you are the parent, claiming the child, and you qualify for the education credit, you want to maximize the credit, $4,000 out of pocket. Claim as much as possible of the scholarship went to room and board unless specifically designated  in the scholarship. The IRS has a great brochure that explains how scholarships and tax credits interact.
• Otherwise, student can just claim the lowest amount of income from scholarship based on education expenses in box 1 plus other eligible costs. See Qualified Education Expenses - Internal Revenue Service

The box 1 amount should reflect actual expenses paid in 2023 including expenses paid for the first 3 months of 2024. It is not a retroactive amount to 2022.

 Tuition paid for the first 3 months of the next year also qualify, See page 12, What Expenses Qualify at IRS Publication 970, Tax Benefits for Education.

Depending on the situation, your dependent son may need to claim the kiddie tax as well. 

• Scholarship income is a hybrid of earned income and unearned income.
• Earned income  for purposes of the filing requirement - Single $12,950 
• Earned income for the and dependent standard deduction. - earned income + $400 
• Unearned income for purposes of the kiddie tax and other 

Reference:  please look at another of my answers for help. 

[Hal_Al]

The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly your student has taxable scholarship income. 

If you claim the tuition credit, you do need to report that you got one or that you qualify for an exception (the TurboTax interview will handle this)

You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid. You will also reach a screen that allows you to adjust the scholarship amount for "amounts not awarded for 2023 expenses".

Or if you find it easier, just change the numbers in boxes 1& 5 to what your records show. The 1098-T that you enter in TT is not sent to the IRS.