1098-T Overage - Box 5 greater than box 1

[jfm2023]

My daughter's 1098-T is showing box 5 (scholarships or grants) exceeded box 1 (payments received for qualified tuition).  Her SSN appears on the document, but my understanding is that I, the parent, should enter the 1098-T on my tax return because I am claiming her as a dependent. Does this mean that I have to pay taxes on the overage?  What if I enter in other educational expenses such as room and board, that is not covered under box 1, that is more than the overage. Will I still have to pay taxes on it?

[DawnC · Accepted solution]

Yes, you would have to pay taxes on the excess.   And yes, you could add other qualified expenses to lower the amount of tax due, but room and board is not a qualified expense.   See Qualified Expenses.   Expenses that do not count:

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

You can also have the student claim the excess scholarship, possibly at a lower rate.   Although, that income may be subject to the kiddie tax, but could still be less than your tax, depending on your tax bracket.   Try it both ways and see what works out best.