Scholarship Exceeds Tuition
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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! 

3 Replies
Employee Tax Expert

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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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.

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.   

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