My dependent twins attend college tuition-free because of the Cal Vet tuition fee waiver program. In addition, they receive VA Chapter 35 Dependent Education Assistance (DEA) benefits because my wife is a 100% disabled veteran. For tax year 2021, each child received a Form 1098-T. I have been filing my taxes via Turbo Tax for years, but this is the first time I have to consider the Form 1098-T. Do I include the respective amounts on my tax return as I navigate through the Turbo Tax questions? Box 1 on Form 1098-T states "payments received for qualified tuition and related expenses", but I never paid these amounts to the universities. I am confused and any insight into whether I include these amounts would be helpful. Thank you.
VA educational benefits are not taxable as income, and they cannot be used for the educational credits. If you did not have to pay out of pocket for educational expenses, you can just exclude the entry in TurboTax. If you did pay any required expenses out of pocket, you can enter to see if you qualify for any tax credits. TurboTax will guide you through the entry, including entering the VA payments.
So, I can proceed with my taxes as if my children did not receive the Form 1098-T? Tuition was paid by Cal Vet (State of CA) and Ch. 35 DEA benefits is paid directly to my children.
Yes, in most cases the VA covers most of the expenses so it is just easier not to enter. (It is for for the credits only so you are not required to report.) @rstilles