KrisD15
Expert Alumni

Education

Since the refund is in reference to the first three months of 2022, but was paid in 2021, you have the option of "recapturing" the credit from your 2021 return or lowering your 2022 expenses. 

 

To "Recapture" the credit, you basically figure your 2021 return with the adjustments for the refunds. If your tax liability would have been different, you would claim that difference as income for 2022.

 

The refunds may not have changed your 2021 tax liability, it depends on HOW MUCH excess expenses you had to apply towards a credit and the distribution. 

 

Don't forget about books and other supplies. Books, supplies and housing are not normally reported on a 1098-T. 

 

If you decide to just lower the expenses for 2022, you can make the adjustments yourself by changing the numbers on the 1098-T if needed. For example, if you are claiming the 1,200 tuition refund on your 2022 return, click the "What if this is not what I paid" link under Box 1 on the 1098-T screen and enter 2,300. (3,500 - 1,200) 

 

You don't say what you paid in 2021 for Room and Board, so I don't know how the 1,300 refund would affect the 2021 distribution. Looks like you paid 700 more Room and Board expense than distribution in 2022, so apply that to 2021 and then perhaps only 600 is in question for the 2021 distribution. Again, I don't know what was paid in 2021. 

 

 

According to the IRS:

"If you pay qualified education expenses in both 2021 and 2022 for an academic period that begins in the first 3 months of 2022 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2022 instead of reducing your expenses for 2021."

 

Pub 970

 

@T4Tax 

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