1098-T

[melissaforpeace315]

Hi everyone!  I'm trying to help my sister file her taxes through TurboTax and I'm a little stumped. Would you mind helping me?

My sister is a Ph.D student and therefore receives free tuition through her program.  She got her 1098-T and on Box 1 it roughly says $20,000 and on Box 5 it roughly says $22,000.  She says that the $2,000 difference is actually the same amount of money that her school-provided health insurance costs.  

My question is: do we need to report this 1098-T on her tax return?  She is NOT a dependent under my parent's tax filing.  I'm just wondering if she needs to report this 1098-T since it's the school providing her tuition and therefore- would this money be considered "taxable"?   I mean i'm thinking it could be both ways, because technically it is the school that "pays" her to attend the Ph.D program (therefore she doesn't need to pay).  Yet, I'm thinking that it could be the other way around too...because if you think about it, my dad has been paying her tuition for her master's program several year's ago and always used her 1098-T to reduce his taxable income.  So in this case, the 1098-T should only provide the possibility of reducing my sister's taxable income (just like my Dad's) and NOT adding to her taxable income, correct?  

I'm just basically wondering if a) we need to report the 1098-T on her tax return: and b) is the amount really taxable?  seems kind of unfair that we need to pay the taxes if it is in fact taxable.  shouldn't the school be paying for the taxes instead then?

[Mellowknee]

I had a heck of a time doing this myself. I had to scour the internet and finally found an answer from one of the tax experts on the Turbotax Q&A site. I can't for the life of me figure out why there is any difference between Box 1 and Box 5. I received full tuition through my state scholarship program TN Reconnect. I never saw the money. It directly goes to the school. It makes it look like there was leftover money after tuition was paid (box 1). Which there was not. The answer they gave was to take Box 5 (whatever the amount) and put it in as income (side job,cash). Yes, it says I now owe taxes, BUT then take whatever is in Box 1 and enter it in as what you paid for tuition. ( In the deductions and credits)  Essentially, you did pay for it. It just never went through your hands. The end result is you now get to claim the Lifetime Learning Credit and the American Opportunity Credit. Instead of owing money to IRS I am getting a refund. I would just play with those numbers and see how it works claiming that as income. The Tax Expert said it was completely legal and IRS says to do what works best with the 1098-T.

[Mellowknee]

Look at this thread. It has some really good answers from people. https://ttlc.intuit.com/community/college-education/discussion/education-credits-and-excess-scholars...

[LoganathanB]

No, you don't have to report your 1098-T, not unless you want to claim an education credit.

The amount is not taxable if you use your scholarship to pay for 

any fees, books, and supplies or equipment that required for your courses.

Click on the link for more information

Scholarship