Is college tuition tax-free when you are awarded academic scholarship 2017? How should 1098T be filed in 2017?

[kristil70]

My full-time college student child has zero income, dividends or wages and no other item that would have her file a return. The 1098T is hers and has $19380 inbox 2 and $19760 in box 5. All went to tuition and books. So I put the 1098T into my TT and it gave the American Oppty Credit to me. Then it showed the education expense exceeded amount allowed. So? I thought that the scholarships were tax-free when used as she had would she need to file and if so, probably not a tax free scholarship? Unless maybe I did not answer a question correct on my return when I entered the form? I appreciate your help there wasn't an answer for 2017 yet so I hope this is enough info if not lmk. thank you.

[MarilynG · Accepted solution]

Your 1098-T amounts show that her Scholarships exceeded her Tuition by $380, so no one would be eligible for an Education Credit based on this document.

Neither of you has to include it in your return.

If, however, she did have Books and Other Required Fees that go way over the $380 extra scholarship amount (like $1000, for instance)  you could enter the 1098-T and the Additional Expenses. 

You probably still wouldn't be eligible for an Education Credit (or a very small one).

The credit is designed to help with 'out of pocket' expenses paid by the student or their parents.