1098-T, Was Any of Your Financial Aid Already Included as Income?

[SAmd_Prince]

I don't know how to answer this question "Was Any of Your Financial Aid Already Included as Income?" If I select Yes, I will not be eligible for any deductible If I select No, I'll get a refund. How can I check if my financial aid is already included as income? I only received a W2 form and 1098-T from my school. I am a graduate student and I am funded by my university that Is why I got W2 form

[ThomasM125]

The issue then is if any of the scholarship income reported on your 1098-T form was used to pay your salary as reported on your W-2 form. Are they separate, in other words. You will have to investigate to determine if any of the scholarship income reported on the 1098-T form was earmarked to be used for your salary in any way. If not, then you can answer "no" to the question regarding whether any of the financial aid was included as income.

[SAmd_Prince]

For this "to investigate to determine if any of the scholarship income reported on the 1098-T form was earmarked to be used for your salary in any way", Do you mean that I should check if it is reported in my W2?

[ThomasM125]

Yes. For instance, your salary may have been paid from a scholarship the University received that is reported on your 1098-T form as scholarship income in box 5.

[SAmd_Prince]

OK. I will ask my university but I am not sure if they can help.

One more question that I have is that the amount in my box 5 is a little more than the box 1 in my 1098-T form. Does this mean that I am not eligible for any deducts or credit?

[SabrinaD2]

When Box 5 (scholarships or grants) on your 1098-T form is more than Box 1 (payments received for tuition), it can impact your taxes:

• Taxable Income: The excess amount is considered taxable income.
• Education Credits: You might still qualify for credits like the American Opportunity Credit or the Lifetime Learning Credit, but the excess scholarship amount will reduce the qualified expenses you can claim.
• Deductions: If scholarships or grants exceed your qualified education expenses, you can't claim a tuition and fees deduction for the excess amount.

For more details, check out these articles:

• IRS: Form 1098-T
• TurboTax: 1098-T Overage - Box 5 greater than Box 1 -TurboTax community discussion

[SAmd_Prince]

I read the thread. The problem with Intui TurboTax is that it asks for the exact number in 1098-T form. So how can we for example report the (BOX 5-BOX 1) in your system? Your system after this section just asks the follow-up question "Was Any of Your Financial Aid Already Included as Income?" with yes and no answer and if we select yes it asks how much of this was already reported in our w2-from. Actually your system makes us confusing which I stuck at this stage

[AmyC]

If your w2 income is on the 1098-T, select yes and enter the income.

As a graduate student, you want to claim the Lifetime Learning Credit, up to $2,000. This credit is nonrefundable so it reduces your tax bill. The credit is 20% of the first $10,000 you spend on education. The tax rate on the same income should be lower. You are generally better off to include scholarship as income and capture the credit.

For example:

Box 1 is $10,000

Box 5 is $25,000

We want $10,000 to go towards college expenses for maximum credit. That means the entire box 1 was paid out of pocket and the entire box 5 was income towards everything else. 

The IRS has a great brochure that explains how scholarships and tax credits interact.

[Personface6870]

I have a question about how to find out if a scholarship that was already reported as income on a W-2 or 1099-MISC. My wife is a PHD graduate student and also earns income as a teachers assistant. If amount on box 5 on the 1098T is less than the amount in box 1 on her W2, does that mean that we can check no on the box that asks the aid was already reported as income on a W-2 or 1099-MISC?

If not do we literally have to email the University and if the sum in box 5 on the 1098T was used to pay the sum in box 1 on the W2? Is there any other way to find out? Do we need to report the amount from box 5 on the 1098T that was used for the W2 box 1 income?

[AmyC]

It depends. Box 5 of the 1098-T and box 1 of the w2 may or may not be related. 

• The w2 should show the amount earned as a teacher's assistant. 
• The 1098-T should have the amount awarded for tuition and living expenses working on the PhD.

It is very rare to see the scholarship money reported on the w2 but it can happen. You will need to double check by looking at the final pay stub for 2025. If the final pay is close to box 1 on the w2, it is just earned income.

• The w2 is  entered as normal 
• If the 1098-T is correct, you will enter it. 
• If the 1098-T is incorrect and the scholarship is included in the wages, then skip the scholarship entry and leave it blank. Make good notes for your tax file in case the IRS asks.

@Personface6870