My scholarships and grants are considered as my income in 2020. I was a student and it increased my taxes significantly. What should I do?

[daggarwal16]

My scholarships and grants are considered as my income in 2020. All those scholarships were used by the university to pay my tuition. I was a student and it increased my taxes significantly. What should I do?

[Hal_Al]

Your scholarships and grants are NOT considered as your income in 2020.  You've entered something wrong.  If box 1 of your 1098-T exceeds box 5, TurboTax will not calculate taxable income unless you tell it otherwise.

Scholarships that pay for qualified educational expenses (QEE - tuition, fees, books and other course materials) are tax free.  Only scholarship amounts that exceed QEE is taxable income, on the student’s tax return.

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 deduction or possibly your student has taxable scholarship income. You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T.  But, entering the 1098-T, makes that go smoother.

What are you trying to do?  Are you a  dependent?

[daggarwal16]

Thank you so much for the detailed response! I am dependent on my parents. My parents are using me as a dependent on their tax-return.

Based on your response, I checked my 1098-T box 1 and the amount entered there by my university is zero. Which is wrong because all the scholarships and grants were used by the university to pay my tuition fee. My parents only paid approx. $5100 towards room, board and dining. Due to the pandemic, since universities sent everyone home, my parents got a refund of $5000 . Basically they did not get any money towards my tuition.

Should I contact my university to correct my 1098-T? What if they don't fix it in time? Can I submit my taxes without 1098-T?

Also since my parents did not pay much out of pocket for tuition, should they enter my 1098-T information on their taxes?

Thank you so much for all your help!

[Hal_Al · Accepted solution]

Don't enter the 1098-T on your tax return, since you know:

1. It's wrong

2. None of your scholarship is taxable

3. Neither you or your parents can claim a Tuition credit.  So, no, they do not enter the 1098-T, on their return, either.

The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return.  Don't bother to ask for a corrected 1098-T; 1. your don't need it and 2. they (almost) always say no. 

Your situation is common: (apparently) the tuition was shown on the 2019 1098-T, but the offsetting scholarship shown on the 2020. 

[daggarwal16]

What a relief! I will not submit my scholarships and grants on my taxes. Thank you so much for your response! It's very helpful!