Should I include scholarships and grants I received this year?

[laurenantone]

I received a grant in January and a tribal scholarship payment in March of this year. I have a 1098-T form and box 5 (scholarships or grants) is blank.

[Vanessa A]

Yes, if your tuition was paid for by scholarships, and grants, this should be included on your return.  Not including it would potentially give you (or your parents) a credit that you may not be eligible for if the scholarships and grants covered all of your tuition. 

[Hal_Al]

Q. Should I include scholarships and grants I received this year?

A. No, if "this year" means 2022. You do not adjust your 2021 tax return for money received in the following year.

But, you further say "I received a grant in January and a tribal scholarship payment in March of this year". If box 1 of your 1098-T includes tuition that was actually paid by the January scholarship payment, then yes, you should enter that payment.  TurboTax will ask if you had any scholarships not shown on the 1098-T. 

[laurenantone]

Hello, I took out a student loan to pay for my Spring semester. Both the grant and tribal scholarship were processed after the due date for tuition payments so I received a refund for both. Would I include both on my taxes since I received a refund? 

[RaifH]

Yes, if you received Form 1098-T with an amount in Box 1 but nothing in Box 5, then you should include the scholarship and grant you received in January and March 2022. 

Your Form 1098-T probably has Box 7 checked which indicates the tuition was actually for expenses incurred in 2022, so you should match up the tax-free assistance you received. You can do this by selecting Edit next to Scholarships/Grants (for all schools) in the Here's Your Education Summary screen. 

Enter the amount you received in the Other Scholarships/Grants/Fellowships field. 

Next year, you will reduce the amount of scholarship income reported in Box 5 by the amount that you are claiming this year. 

[Hal_Al]

Do not confuse loans with scholarships and grants.  

@laurenantone said"I took out a student loan to pay for my Spring semester. Both the grant and tribal scholarship were processed after the due date for tuition payments so I received a refund for both"

I take that to mean you took a loan to pay, in 2021,  for your Spring 2022 term. Then you were reimbursed in 2022 by the grant and scholarship. 

Q. Would I include both on my taxes since I received a refund? 

A. You have some flexibility, The simple solution: don't claim anything since the tuition paid was reimbursed.  

But, what you are allowed to do is claim the tuition credit, on your 2021 return,  based on what you paid (up to the $4000 needed for the maximum credit).  Then claim $4000 of the scholarship, as taxable income, on your 2022 return, because that $4000 of the grant was not used for qualified expenses.  See generic "loop hole" explanation below. 

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There is a tax “loop hole” available. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), as income on his return. That way, the parents  (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship.  You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.

Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.

Books and computers are also qualifying expenses for the AOC. So, extending the example, the student had another $1000 in expenses for those course materials, paid out of pocket, she would only need to report $5000 of taxable scholarship income, instead of $6000.