I had my first semester in college Fall 2021 and all of my school was paid for by scholarships through the school. Because of this I did not receive a 1098-T form, so I am not sure what to do in the education part of the tax form. Please help I am so confused. Thank you in advance.
If your educational expenses were paid by tax free scholarships, you do not need to enter the educational information, since you will not be able to qualify for the education credits. For more information, see What Are Education Tax Credits? - TurboTax Tax Tips & Videos
Thank you for your response, do you recommend I just delete the 1098-T student section entirely since I don’t need to fill it out?
Yes, you can delete the section as long as you are not eligible for education credits or have any taxable income from the scholarship.
If your scholarships covered your entire tuition expenses and you did not pay for tuition or books out-of-pocket or with loans then you would not be eligible for any education credits.
If you did not use the scholarship to pay for room and board or had leftover scholarship money that the school gave to you, then you have no scholarship income to report.
@RaifH - if the scholarships exceeded the QEE expenses, that is taxable income to the student.......right? why would it not be?
(but if the student's wages are less than $12,550, there is no reporting requirement).
There is a tax “loop hole” available. 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 school’s billing statement specifically shows the scholarships being applied to tuition or 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.
*It works the same even if the student didn't get a 1098-T.