You said: "In fact, the total of these two amounts is the total of the tuition."
If that's true, the school did the1098-T wrong. The way it should have been done: that total should have been in box 1.
Q I don't understand why TT is treating the difference in these two amounts as taxable?
A. TT did it correctly. But the base info was wrong.
That said, wrong 1098-T info is such a common mistake, TT is programed for it.
The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly your student has taxable scholarship income.
If you claim the tuition credit, you do need to report that you got one or that you qualify for an exception (the TurboTax interview will handle this)
You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid.
Or if you find it easier, just change the numbers in boxes 1& 5 to what your records show. The 1098-T that you enter in TT is not sent to the IRS.
