When Box 5 (scholarships or grants) on your 1098-T form is more than Box 1 (payments received for tuition), it can impact your taxes:
- Taxable Income: The excess amount is considered taxable income.
- Education Credits: You might still qualify for credits like the American Opportunity Credit or the Lifetime Learning Credit, but the excess scholarship amount will reduce the qualified expenses you can claim.
- Deductions: If scholarships or grants exceed your qualified education expenses, you can't claim a tuition and fees deduction for the excess amount.
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