How to include the Pell Grant as taxable income?

[bambam4]

Im wondering how to include the Pell Grant as taxable income and how it should look on my 1098t. The 1098t lists half my total Pell Grant in box 5 ($3223). Box 1 of 1098t says I had $3176 in qualified tuition related expenses. As far as I know, currently the IRS allows you to use some or all of your Pell Grant as taxable income, in order to claim a larger AOTC credit. So how would I go about doing this?

Would I just subtract $2500 from box 5 of the 1098t, and then put $2500 as taxable income with SCH in the description box on the "Income" portion of turbotax? 

So on turbo tax it would look like this: Box 1 ($3176), Box 5 ($723). Then my income would increase by $2500, however it would allow me to have the full AOTC credit, therefor offsetting the additional taxes? If I put the 1098t exactly how the college sent it, then I only receive about $763 of the AOTC credit. However multiple sources say that if you receive full pell then you should be able to receive full AOTC as well (or at least maximize it). My total income for the year was about 7k so I'm definitely under the standard deduction margin. 

[Hal_Al]

Enter the 1098-T, exactly as received. Later, you will be asked how much of the scholarship was used for room & board (a non qualified expense). At that point, enter the amount you want to be taxable.

You also say "The 1098t lists half my total Pell Grant in box 5".  After entering the 1098-T, you will be asked if there were any scholarships not shown on the 1098-T.  Enter the other half there.

 In order to free up all  $3176 of tuition for the AOTC, enter all $6446 (3223 x 2) of your scholarship as used for room & board.  If you have book and computer costs as well, you may be able to raise the qualified amount closer to the $4000 amount needed for the max AOTC.  $2500 is the max AOTC, but it takes $4000 of expenses to get it.  So, $2500 is not a  number you try to enter anywhere. 

[MichaelG81]

Yes, you can: you would have to claim that the Pell Grant/Scholarship, were used to pay for Room and Board in the education expense section (if this is the case) after entering your 1098-T which most taxpayers need a place to live and have living expenses as outlined in the article below, or other qualifying educational expenses. Even though it may say room and board is not qualified that is why it turns taxable, but gives you the credit from the AOTC American Opportunity Tax Credit or LLC Lifetime Learning Credit, if applicable.

Fact Sheet: Interaction of Pell Grants and Tax Credits: Students May Be Foregoing Tax Benefits by Mi....

Only enter the amount of income indicated after entering your room and board expenses. It will say this is taxable income in the amount of xxxx.xxxx

To enter as income on Fed Return> Go to Personal Income in Federal Taxes>MISC INCOME>OTHER INCOME> Payer PELL GRANT/SCHOLARSHIP AMOUNT XXXX.XX

@bambam4
 

[bambam4]

Ahh now it makes sense, thanks so much. I couldn't figure that out for the life of me.

[Hal_Al]

Entering all your scholarship, in the education section, and then saying it was used for room and board, will automatically treat it as taxable income. TurboTax will put it on line 8r (new for 2022) of Schedule 1.

Do not duplicate the income by also entering it in the income section.