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Prisonwife
Returning Member

If I don’t receive a 1098-T because I’m in all online classes, but I got a fafsa refund?

So I’m a bit confused to say the least. Everything I’ve read online is contradictory. I received Fafsa last semester (fall 2022) for approx 1500 and some change, but it was taking too long to kick in because of issues with my marital status (eyeroll) so I ended up with a scholarship covering my tuition, therefore sending me the full 1500 as a refund via heartland. Now supposedly I have to add that into my yearly income? I can’t reference my 1098-T because as a student taking only online classes, I don’t get one? I’m lost lol. Help? 

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4 Replies
MichaelG81
Expert Alumni

If I don’t receive a 1098-T because I’m in all online classes, but I got a fafsa refund?

It depends, first off some to most scholarships can be taxable income. There is also a 1098-T requirement for most with limited exceptions, one being if students whose qualified tuition and related expenses are entirely waived or paid entirely with scholarships will not get one. Clarification is needed on what type of educational institution you are at, and if it's for credit towards a degree, and which credit you may qualify for; each has different expenses you may or may not be able to claim.

 

Form 1098-T requirement. To be eligible to claim the American opportunity credit or the lifetime learning credit, the law requires a taxpayer (or a dependent) to have received Form 1098-T, Tuition Statement, from an eligible educational institution, whether domestic or foreign. However, you may claim one of these education benefits if the student doesn't receive a Form 1098-T because the student’s educational institution isn't required to furnish a Form 1098-T to the student under existing rules (for example, if the student is a qualified nonresident alien, has certain qualified education expenses paid entirely with scholarships, has certain qualified education expenses paid under a formal billing arrangement, or is enrolled only in courses for which no academic credit is awarded). 

If a student’s educational institution isn't required to provide a Form 1098-T to the student, you may claim one of these education benefits without a Form 1098-T if you otherwise qualify, can demonstrate that you (or a dependent) were enrolled at an eligible educational institution, and can substantiate the payment of qualified tuition and related expenses

 

Exceptions. You do not have to file Form 1098-T or furnish a statement for:

• Courses for which no academic credit is offered, even if the student is otherwise enrolled in a degree program; 

• Nonresident alien students, unless requested by the student; 

• Students whose qualified tuition and related expenses are entirely waived or paid entirely with scholarships; among others

 

Eligible Educational Institution An eligible educational institution is generally any accredited public, nonprofit, or proprietary (private) college, university, vocational school, or other postsecondary institution. Also, the institution must be eligible to participate in a student aid program administered by the Department of Education. Virtually all accredited postsecondary institutions meet this definition. An eligible educational institution also includes certain educational institutions located outside the United States that are eligible to participate in a student aid program administered by the Department of Education. The educational institution should be able to tell you if it is an eligible educational institution. You could also try and request a 1098-T from the institution. 

 

Type of program required Student must be pursuing a program leading to a degree or other recognized education credential for the American Opportunity Credit, expenses is necessary material and items needed for school bought elsewhere or at the school.

 

Student doesn't need to be pursuing a program leading to a degree or other recognized education credential, but must lead to further job skills, at the very least. for the Lifetime Learning Credit, but only tuition and required material bought from the school qualify as expenses, if necessary.

 

Check out this link for more info from Form 8863 Education Credits.

 

@Prisonwife

 

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Prisonwife
Returning Member

If I don’t receive a 1098-T because I’m in all online classes, but I got a fafsa refund?

I’m going to an accredited community college, and the website says the following as per this tax form “

A 1098-T form is generated only for academic students who have qualified tuition and related expenses (QTRE) and payments received during the 2022 calendar year.

Continuing Education, Dual Credit, Early Admit/Early College High School, Home School, Tech Prep, and Virtual College students will not receive a 1098-T form.

Federal rules require all institutions of higher education report payments received (Box 1) for qualified tuition and related expenses (QTRE) to the IRS. Colleges District must report on (Box 1).”

I’m enrolled in a program via the city I reside in where if fafsa won’t cover it they will which is why I got the full amount of my semesters fafsa as a refund. But I am selling a degree/furthering employability or whatever you may call it. Now you said here that about not getting a form but still needed to file that “Students whose qualified tuition and related expenses are entirely waived or paid entirely with scholarships; among others” can you provide any more details as to how this doesn’t directly contradict the end of your response as well as my college’s website?

 

Hal_Al
Level 15

If I don’t receive a 1098-T because I’m in all online classes, but I got a fafsa refund?

Yes, the $1500 excess scholarship is taxable income.  Even though you didn't get a 1098-T, you can enter it thru the TurboTax education section.

 

In TurboTax (TT), enter at:

Federal Taxes Tab (Personal for H&B version)

Deductions & Credits

-Scroll down to:

--Education

  --Education Expenses and Scholarship

Carefully go thru the interview. You will eventually be asked if you had scholarship not shown on the 1098-T.  Then you will be asked if any of it was used for room and board (R&B).  Enter $1500.  R&B are not "qualified expenses".  So, this is how you tell TT that it's taxable. 

 

This assumes your FAFSA was grants/scholarships and not loans. "Refunds" from loans is not taxable income to you.

 

 

Carl
Level 15

If I don’t receive a 1098-T because I’m in all online classes, but I got a fafsa refund?

As I recall (and my knowledge on this may be outdated) if all of your qualified education expenses are covered by scholarships and/or grants, then you have no out of pocket expenses to claim against the AOTC or Lifetime Learning Credit. Any scholarship/grant money that exceeds the qualified education expenses is taxable income to the student.

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