Why does my AGI include ALL my scholarship $(on 1098-t), not minus the amount paid to the institution?

[JulieS]

It depends on how you fill out your education information in the program. In some cases, you will get a larger refund by including your scholarships as taxable income.

You can either claim the scholarships are tax free because they were spent entirely on qualified education expenses, or you can claim a credit or deduction for the amount of qualified education expenses, but you can't do both. 

When you go through the questions, you will get to a screen that asks whether you paid for room and board with a scholarship or grant. If you answer yes, you will be asked for the amount spent on room and board.

That amount will be taxable income to you, but it will increase the amount of education expenses available for a credit. 

The other reason your entire scholarship might be taxable is if you didn't meet all of the requirements to show that your education expenses are qualified. That is, the questions about working toward a degree, attending at least half-time, etc.

If you haven't filed your return yet, you should review the education section carefully and see if you have missed anything or answered anything wrong.

This is how to review your 1098-T form:
    1. Search for "1098-T" using the search box located in the upper right corner .
    2. Click on Go to 1098-T.
    3. Answer Yes to the next two questions.
 

[mm131]

Hi, thanks, this is helpful.  It wouldn't let me describe the full situation in the question, but I am a graduate student. For about 8 months of the year, I was covered by a fellowship ("scholarship"), which is reported on the 1098-T instead of on a W2. 

My total 'scholarships' are listed at around 39,000. This includes tuition (15,000), which is also reported as paid to the institution in box 1.  It also includes things like a research grant (1000), a conference travel grant (700), health insurance (1500), and a stipend to cover living costs for summer and fall 2019 (21,000). 

It's saying I owe quite a bit of taxes (about 3500 federal and 2000 state). When I go to review what my AGI is, it says it's around 52,000, because it's counting the full amount of the 'scholarship income' and what was reported on my W2 as wages. I think that is why my tax burden is so high. I understand that I will need to pay taxes on the fellowship income in excess of tuition, but this seems higher than what I would owe for that.

I am not eligible for any of the education tax credits because I already claimed them in undergrad. I guess what I am trying to figure out is whether my AGI should reflect ALL the funds reported on my 1098T or not. 

[JulieS]

Thanks for the additional details. Based on what you say here, about $24,000 of your fellowship would be taxable. Of course your W-2 wages are also part of your AGI. 

The one thing you can do to reduce your tax due is to review the section and make sure that you are entering all of your qualified education expenses. 

Even though expenses like books, fees and supplies can't be used to claim any credits or deductions, they can be used to show that your scholarship is not taxable. 

To be qualified education expenses, books, fees, supplies and equipment must be required for all students taking the same courses.

Non-qualified expenses include:

• Books, fees, supplies and equipment that are not required for all students taking the same courses.
• Room and board.
• Travel
• Research.
• Clerical help.

Click here for more details.

[mm131]

I agree that 24,000 would be taxable.

But then why does my AGI reflect 52,000 instead of 37,000 (W2 wages+24000)? 

[KurtL1]

When Scholarship income becomes taxable the amount is added to your total wages and SCH is printed on the Form 1040, Line 1 to the left of the your wage amount.

To see a detail of what makes up your AGI you would:

1. Select Tax Forms in the Black bar on the left side of the screen.
2. Select Tools from the drop down menu.
3. On the Tools Center Select Tax Summary
4. Select Preview my 1040 in the Black bar on the left side of the screen.

Look at lines 1-7 on the Form 1040 to see what makes up AGI of $52,000.