Grad Health Insurance and 1098-T

[Anonymous]

I am a graduate research assistant, so I am employed by my university. I get a W2 and all of my fees paid for, including health insurance, as a benefit of my employment. Box 5 on my 1098-T includes the money paid for by my employment for health insurance. I've seen conflicting info on if this is taxed - as I understand it, if this was from a fellowship or something, it would be taxed. But this is from my employment, so I think it should not be? Is it not the same as if I had a normal industry job that paid for my health insurance premiums, which is normally an untaxed benefit?

If I'm correct that it's untaxed, should I enter it as tax-free employer provided assistance or as something else?

Thanks!!

[Hal_Al]

It's not clear what's going on there.  Employer paid health insurance is not reported in box 5 of a 1098-T, even at a university.  If anywhere, it's in box 12 or box 14 of the W-2.  The most likely explanation is you're confused.

But the simple rule is that anything in box 5 is tax free if used for qualified educational expenses (QEE).  Your QEE are shown in box 1 of the 1098-T.   The difference between the two is taxable income (if box 5 is more than box 1).   You may reduce the taxable amount by any other QEE you have, not shown in box 1. e.g. books.

[KrisD15]

You should speak with the HR department. 

If it were reported on the W-2, you're right, it would not be taxable income. 

Reported in Box 5 of the 1098-T does make it taxable. 

In order to treat the funds as employer provided health insurance, it would need to be reported on your W-2. 

[Anonymous]

To clarify - it is not on my W2. My situation is a little unique in that I am the employee of a national lab affiliated with my university. They pay for my health insurance through fee remissions, which is why they show up on my 1098-T rather than a W2. I am certain that this fee on my box 5 was for health insurance. The insurance is definitely a benefit of employment though - if I was not employed, it would not be paid for. (This is not a fellowship or grant either). In past years when I was employed through the university directly, the health insurance was still a tax-free benefit of my employment, and was not on the 1098-T or the W2. I believe that it only showed up differently this year because of the national lab affiliation.

[AmyC]

Under the Affordable Care Act, health insurance is not taxable. Call the issuer and find out where the numbers are coming from.

[hln1994]

You will need to pay tax for the insurance. 

See https://www.irs.gov/credits-deductions/individuals/qualified-ed-expenses

Expenses that Do Not Qualify

Even if you pay the following expenses to enroll or attend the school, the following are not qualified education expenses:

• Room and board
• Insurance
• Medical expenses (including student health fees)
• Transportation
• Similar personal, living or family expenses

[KrisD15]

Please do not get confused about the expense for Heath Insurance. 

The list above are expenses which cannot be used towards an education credit, and also cannot be applied against a tax-free scholarship. 

Expenses not eligible for the credit MAY be used by a 529 Distribution or allocated to assistance claimed as income, such as a scholarship. 

[philipsutter]

My son has school provided health insurance amounts included in 1098-T Box 5. The insurance is NOT included in the “qualified” expense amount in Box 1.

At his school, health insurance is mandatory & students are auto enrolled in the plan, but may waive it. He’s not eligible anymore for the  American Opportunity Tax Credit (AOTC).

In IRS publication 970, health insurance is not listed in Chapter 1 as either a qualified education expense or as an expense that doesn't qualify. However, it is listed in the succeeding section regarding eligibility for credits such as with the AOTC as an expense that doesn't qualify. But, since he is not eligible for AOTC, that section seems like it is not relevant.

So, may he deduct the insurance? If so, how is the deduction made (such as either adding it to Box 1 or subtracting it from Box 5?

Why is this situation ignored by the IRS and Turbo Tax for that matter?

[philipsutter]

The heading on the article you cited is "Qualified Education Expenses for Education Credits". When the health insurance is not related to education credit is the fact pattern to be addressed.  The IRS documentation is unclear.  For example, Publication 970 does not list "health insurance" in Chapter 1 as an expense that does not qualify..  It is listed in ensuing  chapters related to various education credits.  So, why was it omitted in Chapter 1?  All of the other items listed were exactly the same.

[JillS56]

I have read through your questions and the responses that have been provided. As @Hal_Al previously stated Box 5 of the 1098-T is not taxable income as long as it is used for qualified educational expenses.    

All we can tell you is how the 1098-T is reported and what is allowed and what the rules for taxability are.   I believe @Hal_Al has explained it clearly:  

The simple rule is that anything in box 5 is tax-free if used for qualified educational expenses (QEE).  Your QEE is shown in box 1 of the 1098-T.   The difference between the two is taxable income (if box 5 is more than box 1).   You may reduce the taxable amount by any other QEE you have, not shown in box 1. e.g. books.

If you feel that the information in Box 5 is incorrect, you need to check with the university office that issues the 1098-Ts and ask them what the amount in Box 5 represents.   If your 1098-T was prepared incorrectly, then the university is the only one who can issue a corrected 1098-T.   

For reporting requirements and whether or not it is taxable is based on whether or not the amount in Box 5 exceeds the amount in Box 1 and if so the difference is reported as income.   The taxing requirement of Form 1098-T does not change because it was for something that is not taxable.   If that is the case, then the form needs to be corrected.    

[philipsutter]

Thanks for the response.  The question is not whether or not the 1098-T is correct.  The question is whether or not health insurance paid is taxable. In employment situations, it is not taxable. My son is a graduate student/graduate teaching assistant.  Publication 970 Chapter 1 makes no mention of insurance.  It is only mentioned in subsequent chapters related to the qualifying for an education credit. 

So, it is simply that health insurance is not an education expense, qualified or not. Health insurance is a benefit, that is typically not taxable in any other setting.

[JillS56]

Yes, the health insurance is taxable if the amount in Box 5 exceeds the amount in Box 1.   TurboTax is only going to go by what is reported on Form 1098-T.  If you feel this is wrong, you need to take this up with the university.  

If the health insurance is a benefit of employment, then ask the university why it is reported on the 1098-T.   

Is the amount in Box 5 more than the amount in Box 1?   If not, then you are not being taxed on this amount.  

[Hal_Al]

 In employment situations, health insurance is not taxable because the employer sets up a qualified plan meeting IRS regulations.

Giving the student money, to pay his premiums (or even paying them directly), in the form of scholarship, is not the same thing.

[Sulgin]

Did you get this figured out? I'm in the exact same situation this year.

[KrisD15]

If a University supplies health Insurance to a student it could be reported in Box 5 of a 1098-T since Health Insurance Premiums  are not considered as an education expenses, but I would ask why, rather than posting on the 1098-T (taxable) they don't report it on a W-2 (non-taxable) 

If it's reported in box 5 of your 1098-T, it would need to be matched to a Qualifying Education Expense in order to be considered tax-free.

According to the University of Connecticut:

“Since insurance (both medical and dental) is not considered to be a qualified tuition and related expense, this expense it is not reported on your Form 1098-T. However, if the University subsidizes the cost of your insurance then the University subsidy is reported in Box 5 of the Form 1098-T.”