1098T has $30K in payments (Box 1) and $10K in scholarships (Box 5). Full tuition is $40K, but with the scholarship the net cost to me was $30K. The 1098T does not report the $40K. I withdrew $30K from a 529K account. I would expect to pay NO tax on that 529 withdrawl.
On the Student Info Worksheet, in Part VI, the $10K scholarship (Line 19) is being adjusted from qualified expenses of $30K (Line 13), which is reducing my qualified expense (Line 20). This reduction carries forward to Part VIII (Line 2g), which subjects me to a tax on a portion of the $10K in the rest of Part VIII.
I don't understand this. I had to pay $30K and I withdrew $30K. Why is TT count a scholarship against what is already a NET payment on the 1098-T? If box 1 had the FULL tuition before scholarship, I would understand...
