1098-T box 1 causing extra income

[tosontsengel]

Box 1 of my 1098-T is the amount I personally paid to the school. Box 5 is the amount of scholarships I received. No where on this form is the actual cost of the school, except that it is Box 1 + Box 5. However Turbotax comes up with some random number on my “Wages, Salaries, & tips Worksheet” under line 13 “Scholarship/fellowship income not on Form W-2”. 

So Turbotax seems to think that because line 1 is less than line 5 I have extra income?

How do I get rid of this extra income as it shows up on line 1 of the 1040 as “SCH 1367” and adds $1367 to my income.

[DianeC958]

Yes, you do have income if the amount of scholarships your received are greater than the amount you paid for tuition, books and fees to the school.

You are allowed to take additional expenses in figuring your school costs, books, fees, required items for classes.  As you input the information for the 1098-T form it asks you about additional expenses you paid for school.  If after adding the expenses that qualify the scholarship amount is still more than the school expenses you have taxable income for the scholarship.

Guide to Tax Form 1098-T

[tosontsengel]

Maybe the better question is, if I the parent already included the 1098-t and 1098-q on my return then does my dependent child when filing their taxes not need to include either of those forms?

I understand what you wrote, but how does Turbotax know. Turbotax never asks what the cost of school or tuition is. So how can it determine if my scholarship amount is less than or greater than the qualified education expenses? Again, I have found no place in turbotax that asks for what the school is charging for tuition.

[DianeC958]

If the parent is claiming the college student as a dependent then the information for the 1098-T and and 1098-Q is part of the parents tax return.  You do not put this information on the student's tax return also.

When you go to the Deductions and Credits Section.>Education>Expenses and Scholarships (form 1098-T) this is where you enter the information in TurboTax.  On the 1098-T form it shows the amount that was paid to the school for tuition in Box 1 and in Box 5 it shows the amount received for Scholarships.  After this page it asks about other qualifying expenses for school such as books, lab fees and classroom supplies.

[wph1066]

Haven't had to consider education expenses for a long time and am confused about what goes in the TurboTax 1098-T worksheet, specifically Reconciliation of Box 1, Payments Received for Qualified Tuition and Related Expenses.  The 1098-T from the University Block 1 shows they received $16000; block 5 shows the $9000 scholarships student received. This is student's first college semester, so both numbers apply to 2019 only. What are the (A) not paid in 2019, and (B) actually paid in 2019 worksheet lines referring to?  In this case scholarship money partially covered Block 1 tuition, and parents paid the remaining $7000.

[KrisD15]

"Not paid in 2019" is for instances where the education institution did not report the 1098-T correctly. The IRS changed reporting requirements in 2016, and there are still a few instances where the school might report what was billed rather than what was paid, or subtract a scholarship and also report the same in Box 5.

Additionally, a scholarship could cross a year. For example, a 3,000 scholarship might pay in 2020 for expenses you paid in 2019. In this example, you could subtract the scholarship received in 2020 from the 2019 tuition so that you don't have to claim the scholarship as income in 2020. 

The IRS is only concerned with what was paid in the tax year for education expenses of that tax year and/or the first 3 months of the following year.  

IRS Pub 970 goes into detail about the credits and potential income. 

IRS Pub 970

[wph1066]

Then, in my example since the amount in 1098-T Block 1 of $16000 correctly reflects only payments for qualified tuition and expenses the University received in 2019 ($9000 in scholarships, plus $7000 from parents), the corresponding TurboTax 1098-T Worksheet, Reconciliation of Box1 Payments Received for Qualified Tuition and Related Expenses entry is  also $16000 for Enter box 1 amount actually paid during 2019. Now seems pretty straight forward.  Thanks.