TWO FORMS 1098-T

[MANI1346]

Hi. My son 19 is student and has two forms 1098-T and a W-2 around $4200.

One 1098-T just has tuition amount no scholarship number and the other on has $12000 tuition and box 5 is $19500. Can I take the first one on my tax return the second one goes to his tax return + his W-2?

Thanks

[Hal_Al]

Q.  Can I take the first 1098-T on my tax return the second one goes to his tax return?

A. Yes, you can, but it's probably not best.

A 1098-T can go on both the parent and student's tax return, if needed. 

You don't say how much tuition is on the first 1098-T. You only need $4000 to claim the American Opportunity Tuition Credit (AOTC). That means the rest of the tuition (on the first 1098-T) can be used by him to reduce how much of the scholarship is taxable.  Yes, tuition from one school can be allocated to scholarship from a 2nd school, for tax purposes.  If the 1st 1098-T has less than $4000 in box 1, you want to claim some of the tuition from the 2nd 1098-T for the AOTC, even if he has to pay a little more tax on the scholarship.  The AOTC is 100% of the 1st $2000 and 25% of the 2nd  $2000. 

The TurboTax (TT) interview can handle this situation (2 1098-Ts split between two tax returns) but it can get tricky.  Short cuts can be used. Reply back if you need detailed help. 

[MANI1346]

Hi 

I think you did not read correctly my question you have some typo. First one of 1098-T just have a number for tuition. The second one has tuition less than scholarship number. Can I take the first one for my tax return to take AOTC and the second one goes to son tax return +his W-2?

$4200 was for W-2 not for AOTC, I totally did not understand but thanks.

you said: A 1098-T can go on both the parent and student's tax return, if needed. 

A 1098-T should be on my return or my son return, never goes in both return.

[Hal_Al]

I didn't misread it. The $4000 for the AOTC is separate from the W-2.  But, thanks for the point out.  I didn't address an issue:

Q. Does your son even need to report any of this?

A. No, unless he needs to file a tax return to get his W-2 withholding refunded.    $19500 scholarship minus $12000 tuition = $7500 taxable scholarship.  $7500 + $4200 (W-2) = $11,700 total income. This is less than the $14,600 filing requirement.  He does not need to file a tax return. 

The 1098-T is only an informational document. The numbers on it are not required to be entered onto the student's tax return.

If the amount in box 1 of the 1st 1098-T is $4000 or more, you can report only the that one 1098-T on your tax return. The 2nd one isn't needed.  $4000 of tuition is all that is needed to get the maximum AOTC ($2500). 

"A 1098-T should be on my return or my son return, never goes in both return". 

That's not true. The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit and/or the student has taxable scholarship income. The 1098-T is used as an entry tool to do  either or both, when needed.

[MANI1346]

Thanks, you said the second one is not needed, how come? When the amount of scholarship is more than tuition amount(box1) it means (I searched) exceeded amount should be as income! I was wondering that you said no need to report. 

Also my daughter has a 1098-T just has box 5 ( scholarship amount is $28500) and does not have number on box1 in this case, should my daughter file this one on her tax return while she does not have any income like W-2. 

last question: if my daughter does not need to file 1098-T what is a proof that indicate she was a student when she is under 24 on my tax return when I claim her as Student.

[AmyC]

1. You do want to enter both forms 1098-T for your son. If the scholarship can be used for other things, like room and board. See another post of mine here. You may want to make some of it taxable income to him for you to claim the AOTC - if you qualify. The IRS has a great brochure that explains how scholarships and tax credits interact. 

If some of the income does end up being taxable income, then he can also add the 1098-T with the scholarship income and subtract the expenses that qualify.

Filing requirements for dependents can be found here or you can take a quick quiz at Filing requirement. 

2. Your daughter has no tuition in box 1 - there must have been tuition costs. Check her bursar account to see what is listed. You can claim her as a full time student, regardless of the paperwork. The IRS knows she has a 1098-T, they got it.

Scholarship income is a hybrid, it counts as earned income to determine if your son needs to file but then it counts as unearned income to determine if the kiddie tax is necessary, like for your daughter.  Scholarship income is filed on Form 8615 on the child's return. Please go through this quick quiz,

Filing requirement once you have your numbers, to see if she needs to file.

 What is the Kiddie Tax?

[Edited 2/24/25 |8:13 am PST] @MANI1346 

[Hal_Al]

The 2nd 1098-T is not needed on YOUR tax return.  It is needed on his tax return, if he is going to file a tax return.  Based on the numbers you provided, he doesn't need to file unless he wants a refund of withholding shown in box 2 of the W-2.

You still haven't said how much tuition was on the first 1098-T, The amount over $4000 can be used to reduce his taxable income. Although it won't matter, he's already under the filing requirement. So, none of it will be taxed. 

[Hal_Al]

We've explained a lot of the  whys and wherefores of your situation, but to simplify the answer to your basic question:

Q.  Can I take the first one on my tax return the second one goes to his tax return + his W-2?

A.  It depends on how much is in box 1 of the first 1098-T. If it is more than $4000, yes you enter  only the first 1098-T on your return. On his return, he enters both of them and follows the interview.  In particular, be on the lookout for a screen “education expenses used for a tax credit”. It will usually be prepopulated (sometimes with $10K instead of the more appropriate $4K). You can change it for the amount you want to allocate to the AOTC, $4000 in your case. . 

[MANI1346]

Thanks, first one the tuition box 1 is $660.

When I enter this amount (first 1098-T) on my return I can take AOTC, system shows me this credit. $264 refundable and $396 nonrefundable.  My son's withholding is $6 on his W-2 so if the second one which does have scholarships more than tuition ($12000 tuition and box 5 is $19500) enters on his return he should pay tax $170.

Since dependent not eligible to take AOTC.

[Hal_Al]

"So if the second one which does have scholarships more than tuition ($12000 tuition and box 5 is $19500) enters on his return he should pay tax $170."

No. 19,500 - 12,000 + 4200 = $11,700.  But $11,700 is only his reportable income, not his taxable income. He gets a standard deduction of up to $14,600. So he pays no tax.

Now we're going to add $3340 (4000-660 =3340) more taxable scholarship, so that you can claim $4000 of expenses for the full $2500 AOTC.  $11,700 + 3340 = $15,040 reportable income - $14,600 Std deduction = $440 taxable income.  

So, how do you enter that? You use a workaround. You enter the 1098-T from the 2nd school (but not both), but you enter $4000 in box 1 and nothing in box 5 (this is allowed! What you enter is not sent to the IRS*). 

On his return, he enters both of them and follows the interview.  In particular, be on the lookout for a screen “education expenses used for a tax credit”. It will usually be prepopulated. You can change it, if needed, for the amount you want to allocate to the AOTC, $4000 in your case. 

Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $14,600 filing requirement (2024) and the dependent standard deduction calculation (earned income + $450).  It is not earned income for the kiddie tax and other purposes (e.g. EIC).  For grad students and post grad fellows, scholarship, stipend and fellowship income is earned income ("compensation") for IRA contributions.

Taxable scholarship goes on line 8r of Schedule 1

*The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly your student has taxable scholarship income. In your case, both!

If you claim the tuition credit, you do need to report that you got one.

You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid. 

Or if you find it easier, just change the numbers in boxes 1& 5 to what your records show and/or what you need to enter to accomplish the proper reporting for tax purposes.  1098-T that you enter in TT is not sent to the IRS.

.

[MANI1346]

Sorry still I am confused and I think the numbers I gave here was incorrect,  was for 2023.

for 2024

Let me correct the numbers. I am so sorry.

First 1098-T has number on box 1 it is $660.

Second one has numbers in Box 1 : $16700 and box5 is : 26400

son has a W-2, box 1: 6300 and  box 2 is $8  

Now let me know what can I do, I really appreciate it. I mean what numbers should take for box 1 and box 5 for 1098-T on my return from which one, and what numbers should I take for his return for box-1 and box-5 from which 1098-T

[Hal_Al]

This is the simple method:

Enter the 2nd school 1098-T, on your return, with $4000 in box 1 and box 5 blank.  

Enter the 2nd school 1098-T, on his return, with $0 in box 1 and $13,040* in box 5.  Enter no other numbers. 

Ignore the $660 1098-T.

*26,400 - 16,700 -660 + 4000 = 13,040 Taxable scholarship will be reported on his tax return (in addition to the $6300 W-2).  13,040 + 6300 = $19,340 reportable income - 14,600 Standard deduction = $4740 taxable income; about $570 in tax ($480 of which gets you the $2500 AOTC, on your return).

If you have some book and a computer expenses, you can reduce the $13,040 amount (going in his box5)  by those costs. 

[Hal_Al]

"I think the numbers I gave here was incorrect,  was for 2023."

So, what did you do on your 2023 Tax returns (him and you)?

Did you claim the AOTC?

He did not have enough income to file a tax return.  But, if he claimed an addition $4000 of scholarship as taxable, you could have claimed the $2500 AOTC.

You should consider filing amended 2023 returns, for both of you.  He's looking at about $100 in tax, while you get $2500.  

[MANI1346]

Thanks a lot it was very affirmative. But I think The IRS already received all 1098-T if we split up the numbers what will be happen, in fact we changed the real numbers of each 1098-T is it ok?

[Hal_Al]

The IRS makes no effort to match the numbers on the copy of 1098-T they receive from the college to the numbers reported by the taxpayers on their tax return.  The only match is to whether a 1098-T was actually issued. 

The numbers, you enter in TT are "crunched" by TT and usually do not actually appear anywhere on the IRS forms you submit. 

Your fixation on the 1098-T being a controlling document (it isn't) is keeping you from understanding what you're being told:  

1. You're allowed to claim the AOTC even though your student dependent is on full scholarship.

2. Your student has to report  his excess scholarship as income.

3. Reporting even more of the scholarship as income is what allows you to claim the AOTC.

4. Getting TT to do all that correctly can be difficult and short cuts are recommended.