Regarding Non-Qualified but Required Education Expenses

Forum|Forum|13 days ago
September 1, 2026
1 reply
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Hello,

I am a PhD student who had full coverage of tuition and fees by my university for 2025. Among these fees was the student health plan and the transit fee. Since having health insurance was mandatory and the transit fee could not be opted out of, they were both considered fees that were “required to enroll”, even if they were paid for my scholarship money. It seems that health insurance premiums and transit fees are explicitly listed as not qualified expenses for the purpose of LLC and AOTC. However, since they were required for my enrollment, this would mean that they qualify for tax free scholarships (as per 2025 version IRS Publication 970 on page 5)

However, when I did my taxes earlier this year, I believe I paid more than I should as I TurboTax 2025 thought I would be subject to kiddie tax due to my 1098-T having a value in Box 5 that was greater than Box 1. I realized this later after reading this article and am hoping to amend my return but I cannot find a way to tell TurboTax 2025 that the scholarship funds were used for fees that were required to enroll in my degree program. Can I use the same software to file an amended federal and state return? I ended up having to pay a balance for my federal taxes, which I believe I should get back along with a refund. I ended up getting a refund on my state taxes, but they were also subject to CA kiddie tax, so I believe the refund was much smaller than it should have been.

My token number is 13915434168795589-81218885.

Hal_Al

Level 15

Question: Can I use the same software to file an amended federal and state return?

Answer: Yes.

Question: I cannot find a way to tell TurboTax 2025 that the scholarship funds were used for fees that were required .

Answer:

If box 5 of your 1098-T is more than box 1, TurboTax will automatically treat the difference as taxable scholarship income unless you tell it differently. Enter the required/mandatory fees as “other course related expenses”.

Alternatively, just add the fees to box 1 of your 1098-T when you enter it. The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid.

2nd alternative; just don’t enter the 1098-T, at all, if it does not affect your tax return. Again, the 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return.