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What if I did not receive a 1098-T?

I paid tuition and received scholarships, but I did not receive a 1098-T because the amount of scholarships covered the tuition. How do I list education expenses on my taxes?
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2 Replies
DaveF1006
Expert Alumni

What if I did not receive a 1098-T?

The reason you weren't sent a 1098T is that your scholarship completely paid for your tuition expenses.  You had no out of pocket expense to be reported on the 1098T. 

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Hal_Al
Level 15

What if I did not receive a 1098-T?

Q. How do I list education expenses on my taxes?

A. After answering that you did not get a 1098-T, answer yes to the question about qualifying for an exception. That will allow you access to the screens to enter expenses.

 

 The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly the student has taxable scholarship income.  If you know neither are true, you do not have to enter any educational info. 

If you claim the tuition credit, you do need to report that you got one or that you qualify for an exception (the TurboTax interview will handle this)

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".  There is a tax “loop hole” available to claim an education credit, for the parents of students on scholarship. 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.

The IRS actually encourages use of this technique. From the form 1040 instructions: “You may be able to increase an education credit if the student chooses to include all or part of a Pell grant or certain other scholarships or fellowships in income. For more information, see Pub. 970, the instructions for Form 1040 and IRS.gov/EdCredit".  PUB 970 even has examples of how to do the “loop hole”.

 

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