Scholarship does not coincide with tuition expense

[kimc2]

Tuition for spring 2020 study abroad program is both due and paid in calendar year 2019. While an authorized program through the school, it still bills separately from school.  Student is still eligible for and receives school scholarship for tuition for study abroad program for spring 2020 semester.  Scholarship funds are not issued/received until January 2020.   Obviously the scholarship funds received in Jan are reimbursement of tuition I actually paid in 2019.  I don't want to count as income funds that were for valid tuition expenses due to a timing issue.  Normally Student receives Scholarship funds in same period that tuition posts to their account and there is no timing issue.  Please advise how to handle reporting.

[KathrynG3]

No, the scholarship received in January of 2020 for the spring that was billed in 2019 will not be income to you in 2020. This may require a manual adjustment to the 2019 Form 1098-T for any education credit submitted for 2019. And, it may require a manual adjustment for the 2020 Form 1098-T for any education credit submitted for 2020.

If you are reporting an education credit in 2019, you must report the expense in 2019 you paid for Spring 2020 since it was paid in 2019. However, it should be adjusted by the scholarship amount expected in 2020. 

Claiming the expense in 2019 for the academic period that begins in the first 3 months of 2020 will be treated as if the 2020 spring semester began in 2019.

See 2019 IRS Publication 970 Education Expenses  

page 14: Prepaid expenses. Qualified education expenses paid in 2019 for an academic period that begins in the first 3 months of 2020 can be used in figuring an education credit for 2019 only.

Page 41: Some tax-free educational assistance received after 2019 may be treated as a refund of qualified education expenses paid in 2019. This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2019 for qualified education expenses paid on behalf of a student in 2019 (or attributable to enrollment at an eligible educational institution during 2019).

If this tax-free educational assistance is received after 2019 but before you file your 2019 income tax return, see Refunds received after 2019 but before your income tax return is filed, later.

Page 42: Refunds received after 2019 but before your income tax return is filed. If anyone receives a refund after 2019 of qualified education expenses paid on behalf of a student in 2019 and the refund is paid before you file an income tax return for 2019, the amount of qualified education expenses for 2019 is reduced by the amount of the refund.

Click these articles for additional, pertinent details:

The Lowdown on Education Tax Breaks

What education tax credits are available?

What are examples of education expenses?

[kimc2]

Thank you!