If line 5(scholarships, grants) is more than line 1(qualified tuition and fees payments received) then that is counted as income and must be reported. However, if you have additional costs of books, supplies, or equipment that were required for attendance and they were not included in line 1 then you can claim those expenses and offset some of the difference. In addition, line 1 includes qualified payments received for tuition and fees, so therefore any payments, scholarships, grants,etc. that went towards tuition and fees will show in line 1. Keep in mind any scholarships, grants, etc. that are used to pay for room and board (dorm room, meal plan) are considered taxable and need to be included in your earned income. I know this is very counter intuitive to many college students, because the last thing they need is a possible tax bill when they file taxes. Many universities require students to live on campus and purchase a meal plan for atleast their first year, so therefore to consider room and board paid by scholarships, grants, etc. taxable income is insane due to universities requiring these costs of students and then uncle Sam turning around and making them pay taxes on this. This issue badly needs to be addressed by Congress and irs. If the building you work at requires you to park at the building and pay $500 to park at the building every year, but your employer who is housed in that building pays the $500 for each employee to park there, why would it be fair that you have to pay tax on the $500 your employer paid for your parking permit. The 1098T is to determine eligibility for education credits for parents and non-dependent students. My child has a tax bill due because she worked hard for scholarships and received more money than her qualified tuition and fees. Unfortunately the difference between line 5 and line 1 is taxable income.
