Incorrect calculation on 1098-T?

[gytt]

Hello Experts and Friends,

I have a 1098-T form from my daughter's college. Box1 of the 1098-T shows my "net payment" to her college, which I verified, and box5 shows grants from her college, which is not included in box1. Upon entering the numbers per the form, Turbotax displays a summary of my education expenses, showing "Expenses and Scholarships (1098-T)"  with the amount in box1 minus box5. I think this is incorrect. Is my 1098-T form or Turbotax's calculation incorrect? Or both are correct but my understanding is wrong? 

Thanks for advice.

Gary

[MaryK4 · Accepted solution]

If the Box 1 is the net, you want to make the adjustment and NOT include the Box 5 amount- as you said TurboTax is programmed to net out the scholarships.

This is an area that the IRS needs to address- some colleges are not reporting correctly, and TurboTax can only do what it is programmed to do.  

[gytt]

It does look like IRS' fault. Instruction on Box1 is "payments received for qualified tuition and related expenses from all sources". The college didn't receive payments for the grants from anyone. It basically provided a discount on the tuition. Turbotax is also correct because the instruction also reads "The amount reported is not reduced by scholarships and grants reported in box 5."

[AmyC]

The 1098-T is an informational form and not considered a tax form. You can make adjustments to the program with correct information and no worries.

[davet234]

Turbotax should provide a bit more guidance on where to make the adjustment.  (i.e. override line 2c in the Qualified Tuition Program (QTP) Computation of Taxable Distribution in the 1099-Q form.    Since Turbotax automatically subtracts box5 from box 1, you could in-advertently pay taxes on the scholarship.

[RQUIAMZON]

My paid program isn't adjusting for the difference between box 5 and 1 on the 2025 1098t form. Program takes the full grant amount in box 5 as taxable income. 

[MarilynG1]

If you received a 1099-Q and the entire distribution was used for qualified education expenses, you don't need to enter it in your return.  You could still qualify for an Education Credit if Box 1 on your 1098-T is larger than Box 5.  

If this applies, delete your 1099-Q entry.  If Box 5 is larger than Box 1 on a 1098-T, the excess grant/scholarship amount is considered taxable income, unless you add other qualifying expenses that offset it.  If you're not claiming an Education Credit, you don't need to enter your 1098-T in TurboTax, either.  However, the excess scholarship amounts above qualifying education expenses should still be reported as taxable ...

Here's more detailed info on Form 1099-Q and Form 1098-T.

@RQUIAMZON