Why is scholarship taxable.

[Goldenreturn]

Scholarship is calculating as taxable,

.1098 T qualified expenses.    $35134 box1

               Scholarship.                $29000 box 5

              Box 8 checked (at least 1/2 time student)

              Box 9 checked (graduate student)

Tax return is calculating $29000 scholarship fully taxed

anyone know why?

[KrisD15]

Type    letme    into the search 

Click the "Jump to letme" link 

Look to see how the program is handling the Education section, it may be allocating expenses to the Lifetime Learning Credit instead of the scholarship. 

[NCperson]

@Goldenreturn it is not taxable; personally, I wouldn't even enter the 1098-T.  it is for informational purposes only.  

[Hal_Al]

Q. Tax return is calculating $29000 scholarship fully taxed?

A. That is unusual and there is no known glitch in TurboTax (TT).  I suggest you delete the student (and 1098-T) and re-enter.* 

You should expect to see one of two things. 

1. TT treats $3866 of the scholarship as taxable, so that you can allocate $10,000 of tuition to get the maximum  Lifetime Learning Credit (LLC).**

2. TT does not give you the full LLC because you only have $6134 of net tuition.

Books and a computer are qualified expenses for tax free scholarship but not the LLC.

*Or, be on the look out  for a screen called "Amount used to calculate education credit" (or similar wording).  It sounds like TT may have entered the full $35134 (also unusual). You are allowed to change it at that screen (to $10,000, 6134, or 0). 

**Grad students are generally not eligible for the more generous American Opportunity Credit, except in the year they receive their BS/BA.