I received scholarship $ that I used for non-qualified expenses. The excess my school reported on 1098T is less than what I received. Do I report the extra anyway?

[boo_ster]

This is for the calendar 2021 year. Part of the excess was for the 2020-2021 (vs the 2021-2022) school year. I don't think this makes a difference?

[AmyC · Accepted solution]

The scholarship money received during 2021 should be accounted for regardless of the school year. Taxes work on Jan 1- Dec 31 basis for income in and out. Scholarship income in excess of qualified education expenses paid during the 2021 year, are added to your wages. You may have multiple scholarships and the school does not account for them all. You would need to include all excess on your return.

You may want to move extra into the income column and leave up to $4k for expenses paid out of pocket to qualify for the AOTC. I recommend you look at another of my answers for help in maximizing your refund.

[boo_ster]

Thanks for providing both the response and the link to the responses to a similar case. Since my parents can claim me as a dependent (even though I live alone, pay my rent, etc.), I've learned I'm not eligible for the education credits this year. Nonetheless reviewing the linked thread was still immensely helpful as the information may come in handy on future returns. So thank you for providing that. 

One more question: Even though they're not listed on the 1098 T, can I deduct education expenses from the excess aid I received if I used the $ to pay for things like books and supplies? This was the actual use of some of the aid not reported by the university but I'm not sure of the rules.

[boo_ster]

Sorry, one last thing more: I received a 1098T from another school for 2021, in which the expenses exceed the aid awarded. I suppose I can't apply this negative difference to the positive one on the other form (reducing the overall excess grant $)? 

[AmyC · Accepted solution]

Absolutely add all your tuition, books, required expenses and subtract the total of all your scholarships. The forms are not exclusive. You only pay taxes on the difference. Unless....... your parents  qualify to claim the AOTC, they may want you to include up to  $4k more so they can take the education credit on their return. The phaseout for  AOTC is:

$80,000-$90,000 or

$160,000- $180,000 MFJ

It is worth calling your parents and see if they qualify. If they do, they would get a lot more back than you would lose. They may be willing to pay any amount you owe for them to claim the excess. Of course, only the amount over $12,400 should be taxable.