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robjulbritton
Returning Member

Scholarship Exceeds Tuition

My son received combined scholarship (Box 5) that exceeds his qualified tuition & expenses listed in Box 1 of the 1098-T.  We are claiming him as a dependent and I entered all of the 1098-T information as well as his additional qualified expenses (books, etc) on our return.  It is allowing us to take the AOTC for the additional qualified expenses (books, etc.) but Turbo Tax came back saying $1,812 of the scholarship is considered taxable income and must be reported on my son's tax return.  He is filing a return to get a refund from his part time job because they took taxes our of his paycheck.  However, his earned income from the job plus the $1,812 taxable scholarship amount will not exceed the $6,300 so it won't affect his return.  We are simply filing a return for him to get the refund.  In this situation, do I still need to enter all of the 1098-T information on his return.  I definitely don't want to remove it from our return since we will get a small AOTC credit ($1,300) but I also did not want to leave it off of his since TT said it needed to be included on his return.  On his return indicated that he is being claimed as a dependent on our return so it won't let him take an education credits but I just want to make sure I am handling this the right way.  I didn't know if it entering all the 1098-T information on both returns was the answer or if I should only enter the taxable portion of the scholarship somewhere else on his return and leave the 1098-T information off?  It is so confusing....thanks for any help! 

7 Replies
LinaJ2020
Expert Alumni

Scholarship Exceeds Tuition

 

 

Since you are claiming him as your dependent,  you are the only one allowed to claim all the education tax benefits including the American Opportunity Tax Credit on your taxes.  However, if the scholarship amount exceeds the total tuition amount paid, the student is required to report the difference on his tax return. If he does not meet the filing requirements, he does not need to report the excess amount.

 

Hope this helps.

[Edited 2/4/2020 | 2:34PM]  @robjulbritton  Please see the edited information.  Sorry for the confusion.

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robjulbritton
Returning Member

Scholarship Exceeds Tuition

Thank you but after I entered all of the 1098-T information and qualified expenses on our return, Turbo Tax had a pop up screen appear that specifically stated "(Sons name) will need to file a tax return to include this $1,812 amount of taxable income."  If it would have said that amount would be included in OUR taxable income I would understand but it specifically said his name and that he would have to file it on his return.  That's where all my confusion comes in....  If this additional income should be included on our return where would it be entered because Turbo Tax definitely did not add it to our income.  I just don't want to erroneously report this income.  If it does need to be on his return that is fine because it won't change anything since he only earned $2,000 at his part-time job.  I just don't know where it needs to be entered on the 1040EZ and the only place it seems to have a spot for it is under Education but then it asks for the 1098-T information which I already entered on our tax return.

NCperson
Level 15

Scholarship Exceeds Tuition

@LinaJ2020 - can you please evidence where the IRS states that the excess scholarship $$$ (the $1812) remains on the parent's tax return.

 

It's my understanding that TT is correct - that excess goes on the student's return.  Otherwise, why is TT stating to this parent to put the $1812 on the student's tax return.   Are you suggesting that TT has a bug?????

 

if the student is a dependent AND If Box 1 exceeds Box 5 on the 1098-T, the parent reports it; in all other cases the student reports it.  

 

Sounds like in this case, when the son reports it, it won't create any tax due in any event @robjulbritton ..because the standard deduction will rise by the same amount.  standard deduction is earned income + $350 OR $12,200 which ever is lower for a dependent. That $1812 is considered earned income.   

Lissa1950
Level 1

Scholarship Exceeds Tuition

I am having the same problem. I was told to enter 1098 T information on both parent and student tax return by TT.  Neither return  mentioned additional income. Both returns were filed. I then figured something was not right and did research.  I called TT and support person told me to amend both returns. I was told to delete the 1098T from the student and add income to the parent return. I amended the student return and deleted the form and filed the amended return. When I was in the process of amending the parent return I had the pop-up of stating that by name the student had to report income with an amount on their return! I got another TT support person on the phone and could not show them what I saw because now when I went back it was not there and again did not state any income was to be added.  I was advised that the income was to be reported on the parents return and to wait until the refund was received before amending. Once the call was over I received an email from the same person now stating the opposite that the income is the students responsibility. I am so very frustrated and do not know where to turn.  

Hal_Al
Level 15

Scholarship Exceeds Tuition

  @Lissa1950

If you're looking for confirmation:

Taxable Scholarship goes on the student's return, not the parent's return.

 

Depending on how much other income the student has, the first $12,400 of scholarship goes untaxed, because the student gets the full $12,400 standard deduction for scholarship income.

Lissa1950
Level 1

Scholarship Exceeds Tuition

Even if the student lives at home and is a dependent on parent's return?

Hal_Al
Level 15

Scholarship Exceeds Tuition

Q. Taxable scholarship goes on the student's tax return, even if the student lives at home and is a dependent on parent's return?

A.  Yes.  

A person's income (with one minor exception*) never goes on another person's tax return.

 

*If his only income is from interest and dividends, Alaska PFD or capital gains distributions shown on a 1099-DIV, there is a provision for entering it on the parent's return, using form 8814.  Form 8814 essentially acts as the  dependent's separate return,  just filed as an attachment to the parent's return.

 

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