1098T Tuition Versus What I Actually Paid

[LangDawg]

I am getting a bit confused on entering my 1098t information.

I received my 1098t, but I paid significantly more than what is shown.  This is because I had to pay for both the fall 2021 and spring 2022 semesters in 2021.  Can I enter all of the tuition paid in 2021 even if it is different than the 1098t?  If so, will this make me potentially owe money the following year?

Any help or guidance is appreciated.

Thanks!

[MaryK4]

If you paid for classes that start in early 2022 in 2021, you must include them for the 2021 educational credits.  If the 1098-T Box 1 amount is less, (actually  regardless of what the 1098-T has) you should keep copies of receipts and statements that show you made the payments and attended the classes.  And yes, you will have to reduce the 2022 1098-T by any amounts included in 2021.

I always tell taxpayers to keep a running total of expenses, payments, etc for the Educational credits in case of audit.  You need to be able to substantiate that there is no double-dipping which gets even more complicated when there are scholarships and ESAs involved.  

[LangDawg]

OK, thank you.  The scholarship line on the 1098T also only just reflects what my daughter received for the fall semester, but she also received a scholarship for the spring semester as well.  Do I need to just report that next year as well?  It seems like I will have a catch up for all of this her last year of college when I receive a 1098t, but I will have not actually paid anything that tax year.

[KrisD15]

Yes

School years and tax years can overlap which is why schools are supposed to report what was PAID in Box 1. 

You might want to compare the 1098-T with the student's school account statement. 

Match the numbers for the tax year. 

Claim what was PAID in the tax year. 

If you know a scholarship will post in 2022 for the cost of the first three months of 2022 you can adjust one of two ways. 

If the cost or amount paid by the scholarship is included on the 2022 1098-T, just match it on next year's return.

If the cost is included on the 2021 1098-T, apply it to 2021 and adjust for the scholarship next year.

But I am a bit confused as well. 

IF you paid for 2022 classes (which is fine, you can claim what was paid in 2021 for classes attended in 2021 and/or the first three months of 2022) why is Box 1 on the 1098-T low? Box 1 should report what was paid to the school in 2022, so it should reflect ALL your payments. 

Box 5 reports Scholarships passed through the school, so that might look low if you are comparing tuition paid with scholarships received, and the scholarship won't be received until 2022. 

Hopefully this is the student's first year and you can match the payments with expenses before it gets out-of-hand. 

Remember, you can pay for classes attended that tax year and/or the first three months of the next year. 

(you can only pre-pay 3 months ahead)

Expenses paid can ONLY be applied to an education credit for that same year.  

(if you pay in December 2021, it is applied to 2021, if paid Jan 2022, it is applied to 2022)

If you know a scholarship will post the next year for expenses posted on the 1098-T this year (Box 1), adjust for that scholarship by adding it to this years return and subtract it from next years. (Scholarship MAY be moved from one year to the next)

Education Credits are based on MORE EXPENSES THAN TAX-FREE ASSISTANCE such as scholarships. 

If there is more scholarship than expenses (or you use expenses for a credit rather than applying to a scholarship) there may be taxable income in which case the income is claimed by the student. 

IRS Pub 970 is a very good resource and might be worth looking at. 

Pub 970

[LangDawg]

Ok, here are my numbers to help clarify.

At the end of 2021, I PAID over $56,000 in actual costs to the university (private school!).  This is the actual cash that I sent the university for the Fall 2021 and Spring 2022 semesters.  The 1098T form (box 1) shows that I paid $29,943.  Based on your previous response, I'm planning to report the ACTUAL tuition cost of $56,000.  

Also, the same 1098T shows $10,000 for scholarships (box 5), but she received a total of $18,500 for both the fall and spring semesters. I'm assuming that they are only showing the scholarship for the fall semester since it is within the tax year.  

I paid for all of this plus room and board out of a 529 account, so I want to make sure it's not considered taxable.  So....I'm planning on entering the entire tuition amount, but not altering the scholarship box 5 amount since I should have a new 1098T next year.  Is this the right approach?

Thanks again for all of your help.

[ThomasM125]

Since she received $18,500 in scholarships for the fall and spring semesters in 2021, it would be best to report that on 2021's tax return to match it with the tuition expenses paid. That will help prevent having taxable scholarship income on her 2022 return.

In 2022, you will reduce the amount of scholarship income reported, by reducing the amount reported on form 1098-T by the amount added in 2021 but not listed on the 2021's form 1098-T.