Vanessa A
Expert Alumni

Get your taxes done using TurboTax

Since your tuition was higher than your scholarships and grants, it should not increase your taxes due or taxable income. 

 

When you walk through the questions AFTER you entered the 1098-T, did you enter the scholarship again and say it was used for something other than your qualified education expenses.?  If so, go back through and double check your answers.

 

Did you qualify for an education credit?  if so, it is possible that when you entered the scholarship, your credit was based on $2,000 instead of $5,000 which would lower your education credit which could potentially increase your tax due. For example, the American Opportunity Tax Credit is worth up to $2,500.  The first $2,000 is fully deductible dollar for dollar, and the next $2,000 is 25% deductible.  So if your eligible tuition went from $5,000 down to $2,000 your credit would go from $2,500 down to $2,000 increasing your tax due by $500 because of the loss of the credit to offset your taxes due. 

 

While the Lifetime Learning Credit is worth 20% of your education costs up to $10,000 for a maximum of $2,000.  If your education costs dropped by $3,000 this would drop your credit by $600 which could increase your tax due by $600 as you would lose that offset to your taxes due. 

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