Q. Should my mom have reported the 1098-T on her return?
A. Only if you had qualifying educational expenses (tuition, fees, books and other course materials, including a required computer) for which she could claim an educational credit. She would not report the scholarship on her return.
Q. Or is the 1098-T only reported on my return?
A. The 1098-T can be reported on either or both tax returns, depending on the details.
Q. I'm unclear why this is reported as taxable income since it was a grant?
A. Scholarships and grants that exceed qualified educational expenses, is treated as income. So, if box 5 has an amount and box 1 is blank, then the entire box 5 amount is taxable, unless you enter other qualified expenses. Room & board are not qualified expenses.
Why is there nothing in box 1 of your 1098-T? Did the grant pay for tuition and the school just failed to enter it in box 1 (that is unusual)? Do you have any qualified expenses to enter?
There's a loop hole available for the parent to claim the credit, even if you are on scholarship.
