Please, help with 1098-T

[catkik]

T-1098 box 1 shows $7110, box 5 - $5303 for scholarships received. But only $3100 went towards tuition and fees. The rest $4000 were covering housing - $2200 of it was covered by scholarship and the rest $1800 was out of pocket. So when TT asks what part of the scholarships covered room and board, do I show the full $4000 or only part that was paid by scholarships ($2500 or so)? 

[KrisD15]

First of all, lets be clear that "what dollars were used for what" throughout the year does NOT (necessarily)  need to be the same as the way you report it on your tax return.

In other words, you could get a scholarship, pay tuition, pay Room and Board, buy a laptop needed for class, and then rearrange the expenses however is best on your tax return to get an education credit or lower your tax liability.   

Next, I don't think you understand the forms. Box 1 is Only Tuition and fees, no Room and Board. So if box shows 7,110, that is ONLY tuition and fees, NOT Room and Board (even if the room and board was paid to the school) So asking if 4,000 should go to room and board has nothing to do with the 7,100 in box 1 on a 1098-T. Room and board expense does not show on Form 1098-T. 

It can seem a bit complicated, but IRS Pub 970 has some great examples to illustrate the options you might have. 

Ok, so based on your numbers you have 7,110 for tuition and fees expenses paid to the school.

You had 5,303 in scholarships paid in your name to the school.

So right off you have 1,807 expenses to apply towards an education credit.

Now, do you also have Books, Fees, and Supplies to add to your expenses? I do not know that.

Can you apply for the American Opportunity Tax Credit? I do not know that without additional information but if you are eligible, you most likely will want to ty to get it. 

The American Opportunity Tax Credit maxes out with 4000 expenses. 

SO if you already have 1807 in tuition, you max out with 2,193 additional education expenses. 

You could then allocate 2,193 of the scholarship to room and board leaving only 3110 to go toward tuition leaving 4,000 for an education credit (the max) 

This means you will be taxed as income the 2,193, but the credit will more than likely make up for the tax on the income. 

You may need to clarify what numbers are reporting what. Contact the school student aid or school billing records if you are not sure. 

[Hal_Al]

I agree with @KrisD15 , you want to allocate  $4000 of the tuition to the American Opportunity Tax Credit (AOTC), assuming you are eligible (your income is not too high*). 

This means that $2193 of the scholarship must be reported as taxable income on the student's tax return (not the parent's return).   If that is his only income, it is not enough to have to file a tax return.

   Here's a post on the five main points on the  1098-T:

https://ttlc.intuit.com/community/college-education/discussion/re-what-do-i-do-with-form-1098t/01/37...

*$90K,  $180K Married filing jointly.  Phase out begins at $80K ($160 MFJ)

[catkik]

Thank you for your response. I do know that $4000 out of $7110 on 1098-T covered room and board because I also have a bill/statement of expenses from the school which shows only about $3000 for tuition and qualified fees. I also see that $5300 were the scholarships and that means only $3000 were for qualified tuition (again based on the statement from school), so that means the rest of the scholarships are taxable - about $2300. But the out of pocket expenses and if there are any additional expenses can go towards AOP credit, if I understand you right.

Who reports 1098-T, parents or student? Or both? since there are taxable scholarships, does my student need to report it (she also worked an internship and has to file taxes anyway). 

My student paid the room and board and not us/parents. She is still considered our dependent but she paid any of the out of pocket expenses.

Thank you. 

[Hal_Al]

You do not report his/her income on your return. If it has to be reported, at all, it goes on his own return. Someone who can be claimed as a dependent must file a tax return for 2025 if he had any of the following:

1. Total income (wages, salaries, taxable scholarship* etc.) of more than 15,750 (2025).
2.  Unearned income (interest, dividends, capital gains, unemployment, taxable portion of 529 distribution) of more than $1350.
3. Unearned income over $450 and gross income of more than $1350.
4.  Household employee income (e.g. baby sitting, lawn mowing) over $2600 ($17,750 if under age 18)
5.  Other self employment income over $432, including money on a form 1099-NEC

Even if he had less, he is allowed to file if he needs to get back income tax withholding. He cannot get back social security or Medicare tax withholding.

In TurboTax, he indicates that somebody else can claim him as a dependent, at the personal information section.

*Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $15,750 filing requirement (2025) and the dependent standard deduction calculation (earned income + $450).  It is not earned income for the kiddie tax and other purposes (e.g. EIC).  

Taxable scholarship goes on line 8r of Schedule 1, from which TT treats it as hybrid income.

For grad students and post grad fellows, scholarship, stipend and fellowship income is earned income ("compensation") for IRA contributions.

[catkik]

Her tuition and fees were only about $3000 out of reported $7100 and that's the only qualified educational expenses and they are covered by the scholarship that is designated specifically for tuition. 

The rest covers room and board and so I don't see how we can qualify for AOP at all. even though $1800 out of the reported $7100 were out of pocket.

Or are you saying the numbers can be reworked that $1800 are covering tuition and the rest of the scholarships are taxable?  even though they are designated for tuition and fees?

[Hal_Al]

Colleges do not usually include room & board (R&B) in box 1 of the 1098-T. It's a mistake on their part to do so, but it's not unheard of.  I'll assume that $3100 is the correct amount of total qualified expenses, but yu should verify that.  

Q. Who reports 1098-T, parents or student? 

A. Both. 

You report it to claim the American Opportunity Tax Credit (AOTC)  and she enters it to report the taxable scholarship.

It does not matter who paid what.  At tax time, you are allowed to allocate  educational expenses for the best benefit.  Although the general rule, in taxes, is that you must be the one making the payment, to get the deduction or credit, there is an exception for education.  

The simple way to this is enter the 1098-T with adjustments (this is allowed, see explanation at "five points" link).  The TT interview can get messy and mistakes can be made. 

The parent enters the 1098-T with $3100 in box 1 and box 5 blank.  The student enters the 1098-T with 0 in box 1 and $5303 (the taxable amount of the scholarship, since there is no longer any tuition to allocate to the scholarship). 

[user17719025492]

I guess it's still a bit confusing. Even though $3100 is all the qualified education expenses, only $1800 are out of pocket. The rest is covered by the scholarship. So That's all I can use for AOP , right? 

[user17719025492]

You are saying to create my own numbers of qualified expenses and non-qualified expenses for 1098-T.

[Hal_Al]

Q. Only $1800 are out of pocket, so That's all I can use for AOTC, right?

A. No. It does not matter what money was actually used to to pay what.  You are allowed to allocate all the tuition & fees expenses to the AOTC  (and away from the  scholarship; essentially allocating R&B to scholarship).

A. You are saying to create my own numbers of qualified expenses and non-qualified expenses for 1098-T.

Q. Yes. But, "allocate", not "create".

You have $3100 of qualified expenses. They can all be allocated to the AOTC (unless the scholarship is restricted to paying tuition). I have revised/corrected my answer above to:

The parent enters the 1098-T with $3100 in box 1 and box 5 blank.  The student enters the 1098-T with 0 in box 1 and $5303 (the taxable amount of the scholarship, since there is no longer any tuition to allocate to the scholarship). 

If the program asks (it may or may not) how much of the scholarship was used for R&B, answer $5303.

Q. So when TT asks what part of the scholarships covered room and board, do I show the full $4000 or only part that was paid by scholarships ($2500 or so)? 

A. You show the amount you are allocating to room and board, $5303. 

To make some of the scholarship taxable, you may have to tell TT how much you want taxable by saying it was used for (actually "allocated to") room &board. Note the wording at that screen “or other expenses”. You didn’t have to literally use the scholarship for R&B.