1098-T Education

[lindamccrae]

My son is in medical school and he received a 1098-T for 2022.  The amount he received for Scholarships and Grants is $31,575.  Is this $31,575.00 taxable income?  When entered in TurboTax is says he has to pay $2,600 dollars in 

Federal,  $912 in Rhode Island, and $545 in Massachusetts. Can you explain why this is considered taxable income?

Brian McCrae Sr.
Cell: [phone number removed]
Email: [email address removed]

[Vanessa A]

That depends.  What is in box 1?  Did he have any other educational payments such as from a Coverdale account?  

If his box 1 tuition is less than his total scholarships and grants, then yes, it becomes taxable income.  

However, if his total scholarships and grants were not more than his tuition and eligible education expenses, then this should not be taxed.  

[lindamccrae]

Hi Vanessa A,

Box 1 is 67,000  and the Scholarships/Grants is 31,000.  There is no Coverdale account or other educational payments.  When I enter the information into the 1098-T it says he owes $2,631.  Now for a person who made $380 in Rhode Island and 2,000 in MA last year, I wouldn't expect him to have to owe Federal, RI, and MA.

[MichaelG81]

Double-check the amounts entered on 1098T for Box 1 and Box 5, then double-check expenses on 1098T like room and board: if you entered a non-qualified expenses, it may make the scholarship taxable. But since box 1 is much more than box 5 you shouldn't have such a taxable amount on that amount of income you stated. Here are the qualified expenses for education credits. Don't enter non-qualified expenses below into the program, especially if you didn't receive a 1099Q for a prepaid qualified tuition plan or 529 plan.

Qualified education expenses are amounts paid for tuition, fees and other related expenses for an eligible student.

Who Must Pay

Qualified education expenses must be paid by:

• You or your spouse if you file a joint return,
• A student you claim as a dependent on your return, or
• A third party including relatives or friends.

Funds Used

You can claim an education credit for qualified education expenses paid by cash, check, credit or debit card or paid with money from a loan.

If you pay the expenses with money from a loan, you take the credit for the year you pay the expenses, not the year you get the loan or the year you repay the loan.

Qualified Education Expenses for Education Credits

Qualified expenses are amounts paid for tuition, fees and other related expense for an eligible student that are required for enrollment or attendance at an eligible educational institution. You must pay the expenses for an academic period* that starts during the tax year or the first three months of the next tax year.

Eligible expenses also include student activity fees you are required to pay to enroll or attend the school. For example, an activity fee that all students are required to pay to fund all on-campus student organizations and activities.

For AOTC only, expenses for books, supplies and equipment the student needs for a course of study are included in qualified education expenses even if it is not paid to the school. For example, the cost of a required course book bought from an off-campus bookstore is a qualified education expense for AOTC.

See our Education Credits Frequently Asked Question page for more information on the IRS website.

Expenses that Do Not Qualify

Even if you pay the following expenses to enroll or attend the school, the following are not qualified education expenses:

• Room and board
• Insurance
• Medical expenses (including student health fees)
• Transportation
• Similar personal, living or family expenses

@lindamccrae