I received a 1098-T from my university with boxes 1 and 5 filled (showing I received scholarships). I believe that being in the military shouldn't preclude me from declaring a 1098-T for my taxes, but with my particular arrangement with the school, my supervisors handle all the payment communications. As such, I'm pretty lost here. Thanks!
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 you have taxable scholarship income.
If you claim the tuition credit, you do need to report that you got one (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.
If your expenses were totally covered, and there was no excess scholarship, you do not need to report the 1098-T. But, see "loop hole" below.
There is a tax “loop hole” available to claim an education credit, for the parents of students on scholarship. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), as income on his return. That way, the parents (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship. You cannot do this if the conditions of the grant are that it be used to pay for qualified expenses.
Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.
Books and computers are also qualifying expenses for the AOC. So, extending the example, the student had another $1000 in expenses for those course materials, paid out of pocket. She would only need to report $5000 of taxable scholarship income, instead of $6000.
The payment made by the military is tax free and must be allocated to tuition (it can not be used to claim the 'loop hole"). The school scholarship might, if it wasn't restricted.
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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 you have taxable scholarship income.
If you claim the tuition credit, you do need to report that you got one (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.
If your expenses were totally covered, and there was no excess scholarship, you do not need to report the 1098-T. But, see "loop hole" below.
There is a tax “loop hole” available to claim an education credit, for the parents of students on scholarship. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), as income on his return. That way, the parents (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship. You cannot do this if the conditions of the grant are that it be used to pay for qualified expenses.
Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.
Books and computers are also qualifying expenses for the AOC. So, extending the example, the student had another $1000 in expenses for those course materials, paid out of pocket. She would only need to report $5000 of taxable scholarship income, instead of $6000.
The payment made by the military is tax free and must be allocated to tuition (it can not be used to claim the 'loop hole"). The school scholarship might, if it wasn't restricted.
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**Mark the post that answers your question by clicking on "Mark as Best Answer"