Tax Year Prior to 2020: Are you required to file your 1098-T form?

[MayaD]

If your grant/scholarship amount (box 5) is more than your tuition (box 1/box 2) you need to report form 1098T because excess scholarship money may be treated as taxable income on your return.

If your scholarship covers tuition as well as room and board, the amount spent on room and board is considered taxable.

Qualified education expenses include tuition and other expenses that are necessary for you in order to enroll in a course or program. Transportation costs or room and board, are not included.

[niyabrown0117]

How do you qualify for the American Opportunity Credit and/or the Lifetime Learning Credit?

[MinhT1]

@niyabrown0117

1. American Opportunity Tax credit:

To be eligible for AOTC, the student must:

• Be pursuing a degree or other recognized education credential
• Be enrolled at least half time for at least one academic period beginning in the tax year
• Not have completed the first four years of higher education at the beginning of the tax year
• Not have claimed the AOTC or the former Hope credit for more than four tax years
• Not have a felony drug conviction at the end of the tax year

2. Lifetime Learning credit

To claim the LLC, you must meet all three of the following:

1. You, your dependent or a third party pay qualified education expenses for higher education.
2. You, your dependent or a third party pay the education expenses for an eligible student enrolled at an eligible educational institution.
3. The eligible student is yourself, your spouse or a dependent you listed on your tax return.

[Jessmtz009]

Curious what you ended up doing? I'm running into this issue this year

[Rainman12]

@ Jessmtz009 - Your Age, and IF you have a living Parent matters. If you're under 24 with a living parent, generally They get the AOC - you can not.

[Bshukla1234]

Hi did you ever get a resolution to your issue?  My daughter is in same boat. Her scholarship is more than payments but she didn’t receive any money from the school. 

[ErnieS0]

Yes. Your daughter is required to file a tax return and include Form 1098-T.

Tax Champ @Opus17 says: "If your grants and scholarships (not loans) are more than tuition, the difference (amounts for room and board or living expenses) is taxable income. You owe income tax on that amount so it will reduce your refund from other wages and withholding or you may even owe.

"The IRS will send you a letter and a bill for back due taxes, interest and penalties if you don't report the income and pay the correct tax."

@Bshukla1234.

When filing 1098-t form my scholarships and grants are higher than my tuition and expenses. So it is...?

[Shnyar]

I’m a college student and i pay everything by myself without any Financial help 

[FangxiaL]

If your parents are not claiming you and you are working on your bachelor's degree, file your 1098-T with your tax return and claim the American Opportunity Tax Credit (AOTC), assuming you also meet other requirements.  

To be eligible for AOTC, the student must:

• Be enrolled at least half time for at least one academic period beginning in the tax year
• Not have finished the first four years of higher education at the beginning of the tax year
• Must meet the income requirement (MAGI should be under $90,000.)
• No one can claim you as a dependent

@Shnyar

[Hal_Al]

There's a new urban myth among college students that says they can get a $1000 from the government just for filing a tax form. For most of them, they simply aren't eligible. A full time unmarried student, under age 24, even if you don't qualify as a dependent, is only eligible for the refundable portion of the American Opportunity Credit if he supports himself by working. You cannot be supporting yourself on parental support, 529 plans or student loans & grants. You usually must have actually paid tuition, not had it paid by scholarships & grants.  It is usually best if the parent claims that credit. 

You cannot claim a credit if you are claimed as a dependent by someone else.

[malmeida11]

If my Box 5 is greater than my box 1 but less than 12,400 (the amount of income needed to file as single), do I need to file still? I have made no other income and the total income would be less than 12,400. 

[Hal_Al]

Q. f my Box 5 is greater than my box 1 but less than 12,550 (2021 filing requirement) , do I need to file still?

A. Simple answer: No.

But taxes aren't simple. If you are a dependent, your parents may be able to claim a tuition credit if you declare more of the scholarship to be taxable.

If you are a student, over age 23, and are not claimed as a dependent by someone else (e.g. your parent) you may be eligible for the up to $1000 refundable American Opportunity (tuition) Credit. You must be at least a half time undergraduate student. There's even a loop hole available to claim the credit, if you are on scholarship, by making more of the scholarship taxable.

_____________________________________________________________________________________

There is a tax “loop hole” available. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), as income on his return. That way, the parents  (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship.  You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.

Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.

Books and computers are also qualifying expenses for the AOC. So, extending the example, the student had another $1000 in expenses for those course materials, paid out of pocket, she would only need to report $5000 of taxable scholarship income, instead of $6000.

[LFields]

My daughter's 1099-T has a larger amount in Box 1 ($6000) than Box 5 ($2000).  If she isn't eligible for any educational credits, does she need to include this info on her taxes? Does it create $2000 of income?

[Hal_Al]

Q.  My daughter's 1099-T has a larger amount in Box 1 ($6000) than Box 5 ($2000).  If she isn't eligible for any educational credits, does she need to include this info on her taxes? Does it create $2000 of income?

A. No. Scholarships are tax free, if the money was used to pay for qualified expenses.  Sine box 1 is more than box 5, it's assumed the $2000 scholarship paid part of the $6000 tuition. Tuition is a qualified expense.

You say "she isn't eligible for any educational credits".  Most students are not eligible.  So, in most cases, the parent claims the credit, because the student is their dependent.  A parent can be disqualified from the credit due to income too high, in which case, the credit is simply lost.  

[RaifH]

No, she does not have to include it, but no it does not create taxable income if she does. If she elects to include it but does not qualify for any education credits, it will not have any impact on her return, positive or negative. 

If she is still your dependent, you would include her Form 1098-T on your return. The same rules apply, it will not create income if you choose to include it, but if your household does not qualify for education credits, it would not benefit you in any way. 

@LFields