Box 5 is less than Box 1 on my 1098-T form, yet my refund is reduced significantly by entering it. Is this correct?

[acaruso7]

The value in Box 5 of my 1098-T (Scholarships or grants) is more than half of the value in Box 1 (Payment received for qualified tuition and related expenses), but less overall - does this mean that the amount of taxable income from scholarships is greater than the amount of expenses paid out of pocket, thus reducing my refund? From my understanding, when Box 5 is less than Box 1, the refund should stay the same or increase.

To reiterate, Box 5 < Box 1 and Box 5 > half of Box 1. How should my refund be affected by this situation?

[KrisD15]

Yes, if that is the only entry you are doing, and Box 1 is larger than box 5, the refund should increase or stay the same.

If the scholarship is listed on the 1098-T, DO NOT enter it a second time on the screen that asks for any scholarships, fellowships or grants you received. That screen is for ADDITIONAL scholarships. 

[acaruso7]

Hi Kris, thanks for the response. That is not the behavior I'm seeing - when I enter the values for Box 1 and Box 5, the refund amount is reduced. I am sure I'm not entering any amounts twice - tried manually entering the values, and uploading a PDF of the form, and I get the same behavior. Could this be due to something specific to my tax situation, or could it be a software issue?

[KrisD15]

You are the student, and you are not a dependent? No one else claims you? 

Go into your account and Click on Tax Tools on the left side bar, then Tools which will drop down

Next click on "View Tax Summary" on the screen

Then go back to the side bar and Click "Preview My 1040"

Use the inner scroll bar to look at the 1040 and see if you can tell what's going on. 

Look at line 1 to see if additional income is being reported. 

Look for Form 8863 to see what is listed for the 1098-T. 

Look on schedule 3 to see if there are any education credits

[acaruso7]

That's correct, no one else claims me. I was a student from January - May of 2019. I do have additional income from August - December of 2019.

I just re-entered the form and suddenly the refund amount increased. This time, it asked me "Were you working on a Bachelor's, Graduate, or Associate's Degree?" to which I answered "Yes" - I didn't get that prompt before, so I'm not sure what changed. This time around, i was presented with a whole different set of prompts, was able to claim the Lifetime Learning Tax Credit, and now there is a value showing on Schedule 3 for Education Credits. Again, I'm not sure what changed, but this seems to be the expected behavior now

[lilianna1342]

I am also having this issue. I took a class to "improve job skills" and paid completely out of pocket, so Box 5 is 0. However, when I enter my 1098-T, my refund is lowered by almost as much as my Box 1 amount. I'm essentially paying for this one, 10-week noncredit class twice. How does that make sense?

[RaifH]

If you are eligible for the Lifetime Learning Credit, you should receive a tax credit for up to 20% of your Box 1 Tuition Expenses with the credit never being greater than $2,000. Please note that if your filing status is married filing separately, you are not eligible for this credit. You are also not eligible if your income exceeds $139,000 if married filing jointly and $69,000 for other filing statuses. If this is the case, then you do not need to enter any education information on your tax return.  

I am unable to re-create a scenario in which entering the tuition expenses is increasing the tax due. Please follow these steps to enter the tuition expense and let me know if it is causing a decrease in your tax refund or an increase in your tax due:

1. Open or continue your return
2. Select Search and search for 1098t 
3. Select the Jump to link in the search results
4. Delete the information you already have in there and click Add a Student
5. Answer Yes to Did you get a 1098-T for the year? and Continue
6. On the next screen, you can choose how you'd like to add your 1098-T. You can upload a digital copy from your computer or type it in yourself. Select which option you'd like and Continue
7. After entering the information from the 1098-T you will navigate through several more questions. 
8. When you click Maximize My Education Tax Break, TurboTax should determine you are eligible for the Lifetime Learning Credit if you are under the gross income limitation.

@lilianna1342