Son is a Resident Advisor at college where he gets free room & board.1098T box 5 notes cost of Room & Board. But below college states it's non reportable?

[rickpeggysmith]

My son is a RA and his school supplies free Room & Board as part of his being an RA.  His 1098T in box 5 Scholarships and grants has the cost of his room and board of $20,000.   Under the 1098T, the school supplied supplemental information that states "Tax report description, NON REPORTABLE, $20,000. 

How do I fill out the taxes correctly, so that he does not pay income on the $20,000?

[rickpeggysmith]

I know that room & board is usually not exempt, but as a Resident Advisor, he is required to live on campus so wouldn't this make it exempt according to IRS Pub. 525?  and how do I adjust the scholarship on turbo tax to reflect that the room & board scholarship is actually a non taxable occurance?

[CarolC · Accepted solution]

When completing the 1098-T education expenses in TurboTax, you will enter $20,000 as Other Scholarships/Grants/Fellowships.  Box 5, which includes amounts for Scholarships or Fellowships, must be qualified to receive tax-free status.  Room and Board are not qualified education expenses and the amount for the benefit received is taxable income.  

The mention of "Non Reportable" by the college indicates that this is income not being reported to the IRS on a W-2 or 1099; as payments of scholarships, fellowships, and grants paid to U.S. citizens and resident aliens are not generally reportable to the IRS and are not generally subject to withholding of tax.  These payments are also not subject to FICA tax.

Generally, payments for services rendered by a student at a college or university are taxable.

See this IRS article Tax Benefits for Education: Information Center for additional information.  Scroll down to the Scholarships and Fellowships section.

[CarolC]

@rickpeggysmith The income cannot be adjusted in TurboTax because it does not qualify to be tax-free.  I'm sorry that the link in my post above is currently not working.  But you can also refer to IRS Publication 970, Page 5 (the 2017 version is not available yet).  Here it clearly explains the rules.  It's similar to a firefighter who is required to live at the station, but his income is still taxable.  Because your son is required to live on campus, there may be certain deductions allowed on Schedule A.  He can deduct any expense he had to pay out of pocket and was not reimbursed by his employer.  These expenses must be ordinary and necessary to perform his job duties.

[Anonymous]

Why wouldn't IRS Publication 525 (page 7, Meals and Lodging) apply?  The RA room and board benefit is directly related to employment as a Resident Assistant.  In our case, the meals are:  furnished on the business premises of the employer (the University) and furnished for the convenience of the employer.  The lodging is: furnished on the business premises of the employer (a dorm), for the convenience of the employer, and a condition of employment as a Resident Assistant.

If room and board were simply given as an additional scholarship and not tied to any specific employment requirement, I could understand it being taxable.  However, I am having a hard time understanding why it's taxable given IRS Pub 525 and why it would be included on a 1098-T.  

Thanks in advance for any clarification that can be provided.

[ColeenD3]

This publication refers to Fringe Benefits which would be reported on Form W-2, not Form 1098-T.

Fringe Benefits (page 4)

Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay FMV for them or they’re specifically excluded by law. 

Form W-2. (page 5)

Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips, and other compensation, and, if applicable, in boxes 3 and 5 as social security and Medicare wages. Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement).