1098 T

Forum|Forum|4 months ago
February 21, 2026
1 reply
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We have a dependent son age 22. He only attended college in spring 2025 and worked the rest of the year. How do we enter the info from 1098 T info. on both of our taxes? Box 1 is only $12,895 because remaining bill for spring 2025 was paid out of pocket in Dec 24 and not applied to 2025 1098 T. Box 5 includes pell grant of $3948 and the remainder is a scholarship from the school. So he will have taxable income of $4017. Can I use the pell grant towards room and board to help claim AOTC on our taxes? I read about the loophole of entering $4k in box 1 on ours and $0 in box 5 and entering $0 in his box 1 and the taxable excess income ($4017) plus $4k in box 5. I wasn't sure how the pell grant might affect that? Any help would be appreciated! Thank you!!

TurboTax Basic Windows

Hal_Al

Level 15

Yes, enter the 1098-T on your return with $4000 in box 1 and box 5 blank.

On his return, enter the 1098-T with only $8895 in box 1 ($4000 less than the actual amount). Enter the full box 5 amount. He will have $8017 of taxable scholarship, rather than 4017. In his interview, he will be asked if any of the grant was used for room & board. Enter $8017 as the amount used for room and board.

If he had and book and computer expenses, the taxable amount can be reduced.

A couple of caveats:

1. Graduation year is usually the 5th calendar year of schooling. You are only eligible for the American Opportunity credit (AOTC) 4 times in your student's schooling. If you already claimed the AOC four times in the past, you will only be eligible for the lesser Lifetime Learning Credit (LLC), which takes $10,000 of tuition (not $4000 like the AOTC). The credit is 20% of tuition paid. Depending on you and your son's tax rates, you may need to re-think who claims it.

2. If he finished school before May 1, 2025, he may not qualify as your dependent. To qualify as a "qualifying child" dependent, he must have been a full time student for parts of 5 calendar months. He can still be a "qualifying relative"/other dependent, if his income was less than $5200.

See full dependent rules at: https://turbotax.intuit.com/tax-tools/tax-tips/Family/Rules-for-Claiming-a-Dependent-on-Your-Tax-Return/INF12139.html

Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $15,750 filing requirement (2025) and the dependent standard deduction calculation (earned income + $450). It is not earned income for the kiddie tax and other purposes (e.g. EIC). For grad students and post grad fellows, scholarship, stipend and fellowship income is earned income ("compensation") for IRA contributions.

Here's a post on the five main points on the 1098-T:

https://ttlc.intuit.com/community/college-education/discussion/re-what-do-i-do-with-form-1098t/01/3760212#M63114

See #4 for the "loop hole" discussion

The IRS actually encourages use of this technique. From the form 1040 instructions: “You may be able to increase an education credit if the student chooses to include all or part of a Pell grant or certain other scholarships or fellowships in income. For more information, see Pub. 970, the instructions for Form 1040 and IRS.gov/EdCredit". PUB 970 even has examples of how to do the “loop hole”.

mhschraederAuthor

Level 2

Awesome, thanks for your explanation. Makes sense. His room and board/meal plan is only $5667 (I forgot to include before) so do I only enter that when asked what was used towards it rather than the $8017? How does the $3948 pell grant affect the room and board expense?

He finished school as semester early so this will be last time we can claim credit and school was out after May 1 so thankfully can still be a dependant. Thank you so much!

Hal_Al

Level 15

Q. His room and board/meal plan is only $5667. Do I only enter that when asked what was used towards R&B,

rather than the $8017?

A. No.

When asked if any of the scholarships was used for room and board, answer yes. Then enter the amount you want to be taxable, in the pop up box. R&B are not "qualified educational expenses" for tax free scholarship. So, this is how you tell TT that it is taxable. Note the wording at that screen “or other expenses”. You didn’t have to literally use the scholarship for R&B. This will put the taxable scholarship on line 8r of Schedule 1.

Q. How does the $3948 Pell grant affect the room and board expense?

A. Not at all. The $3948 is already included in the box 5 amount on the 1098-t. No distinction between Pell & school scholarship is needed. Calling it room and board is just how you make it taxable.