topic 1098-T question in Education

1098-T question

curlymomma — Thu, 27 Mar 2025 01:11:37 GMT

We claim our son as a dependent on our tax return and he files his own taxes. His college didn't calculate his scholarships correctly. They will not reissue the 1098 and told me I can use my own calculation by adding up the scholarships from his bills. I did this and included all scholarships and TAP that he received (in NYS).

My question is based on my calculations since the 1098-T is incorrect, if Box 1 of his 1098-T is $9,711 and Box 5 is $8,398.26 but includes scholarships for $7,500 that can only be used for non-tuition expenses (but can be used for fees & books) and another is earmarked just for housing. So, a majority of the scholarships cannot be used for qualified expenses. Since Box 5 is less than Box 1, does he need to claim any of the scholarship money as income? If so, can he subtract the fees ($2,641.50) since they are a qualified expense, bringing the taxable income down to $4,858.50 for his taxes?

For the AOTC Credit on my taxes, I entered $9,711 for qualified tuition and expenses, $700 for books, and $8,398.26 for scholarships. This gave me a $2,000 credit. I'm hoping I entered this correctly?

Re: 1098-T question

Hal_Al — Thu, 27 Mar 2025 02:19:38 GMT

Your numbers need clarifying.

"another is earmarked just for housing"

Then that's taxable. How much? Already in the $8398?

Where does $4858 come from?

$2642 Fees? already in the $9711?

Does he have any other income? As long as his total income is less than $14,600. Then it doesn't matter how much of his scholarship is taxable. You should claim the full $4000 of tuition for the AOTC.

Re: 1098-T question

curlymomma — Thu, 27 Mar 2025 11:22:14 GMT

Thank you for your response. Here’s the breakdown of scholarships: $6,000 non-tuition but can can be used for fees/books

$1,000 housing award

$500 non-tuition scholarship

$250 NYS Merit Excellence award $648.26 NYS TAP

For tuition and fees breakdown is:

$7,070 tuition

$2,642 fees

The $4,858 figure I got from subtracting the fees, NYS Merit, and NYS TAP from his total scholarships

($8.398.26-2,642-$250-$648.26). My reasoning is that the NYS Merit and NYS TAP could be used to pay for qualified expenses. The $4,858 is what my son would claim as income on his taxes.

But from reading your message, since he didn’t make over $14,600 then he shouldn’t file at all? My only concern is he made $9,627 in income from a job. Do I need to add the income from the scholarships to determine if he needs to file or is this $14,600 threshold purely income from a w-2?

When you say to claim the full $4000 for the AOTC credit, would I do that by putting $4,000 for qualified expenses and $0 for scholarships?

Thanks for your help!

Re: 1098-T question

Hal_Al — Thu, 27 Mar 2025 12:56:15 GMT

Q. Do I need to add the income from the scholarships to determine if he needs to file?

A. Yes.

Q. When you say to claim the full $4000 for the AOTC credit, would I do that by putting $4,000 for qualified expenses and $0 for scholarships?

A. Yes, on your (the parent's) return.

From IRS Publication 970: A scholarship or fellowship grant is tax free only to the
extent:
• It doesn't exceed your qualified education expenses;
• It isn't designated or earmarked for other purposes
(such as room and board), and doesn't require (by its
terms) that it can't be used for qualified education expenses

So, the $4858 sounds about right. So the student has $4858 of taxable scholarship. $8398 - 4858 = 3540 allocated to tuition. 9711 - 3540 - 2642 -700 = $2829 of expenses to claim the AOTC. You need $4000- 2829 = 1171 more expenses. So, the student increases his taxable amount tp 4858 + 1171 = $6029

How does the student report his $6029 of taxable income? The easiest way is to enter a 1098-T with 0 in box 1 and the calculated taxable amount ($6029) in box 5.

But 9627 (W-2) + 4858 = $14,485 and that's less than $14,600. So he doesn't have to file. Adding $1171 means he does have to file. At $2829 of expenses, you get $2207 AOTC. Having him file gets your $2500, but he pays $100-$200 depending on your tax rate (the kiddie tax applies)

Re: 1098-T question

curlymomma — Thu, 27 Mar 2025 15:48:55 GMT

Thank you for your response. I'm clear on everything except how you're figuring the qualified expenses if you can help me with that part.

$9,711 is what was paid for tuition and fees, subtract $3,540 for fees and part of tuition paid with scholarships and this equals $6,171 in qualified expenses. You also subtracted $2,642 which is for fees and part of the $3,540 number (that part confused me, I'm hoping you can explain it to me). $700 was also subtracted which is for textbooks and I thought a qualified expense. So, I can add that to the $6,171 and have $6, 871 in qualified expenses. If this is correct, then I have met the $4,000 criteria for the AOTC and would put $4,000 in box 1 and 0 for box 5?

Please help me understand your reasoning as I must be missing something. I always do my own taxes and this has been testing me!

Re: 1098-T question

Hal_Al — Thu, 27 Mar 2025 16:16:27 GMT

If you're confident with your math, use it. My numbers were my understanding of the confusing info you provided. The explanation, most likely is, my understanding of them is wrong.