Outside scholarship not included on 1098-T

[catkik]

My daughter received several scholarships. Most of them were reported on 1098-T by her school. But there is one scholarship for $7000 that was paid directly to her. It is technically designated for future expenses, and was not used for any 2024 expenses. 

in the Education section of Deductions and Credits, I filled out 1098-T information and then added additional scholarships of $7000. Then TT asked me a question - Was any of the scholarship income not designated to pay 2024 educational expenses? 

I wonder if I can answer Yes, in regards to this $7000, since she plans to use it next year. 

[Hal_Al]

To be tax free, scholarships must be used to pay qualified educational expenses  (QEE) in the same year that the money was received.  There in one exception. Money received in 2024, for the first term of 2025 is qualified. 

If that's the case, answer that question yes. That's the specific purpose of that question; to treat the $7000 as not being received in 2024.  When you do your 2025 tax return, a year from now, treat the $7000 as being received in 2025. 

[DaveF1006]

No because none of this was used to pay 2024 educational expenses.

[catkik]

So we would just treat this scholarship ($7,000) as a taxable income, right? 

[Hal_Al]

Q. So we would just treat this scholarship ($7,000) as a taxable income, right? 

A. Yes, unless it was used to pay  qualified expenses in the first term of 2025 (a term staring before April 1).