Why is TurboTax saying my daughters Scholarships are taxable income?

[PagosaPastor]

TurboTax is saying my daughters scholarships are taxable income. I believe this is an error, or I have filled something out incorrectly. None of the scholarships were used for anything but tuition, and her expenses far outweigh her scholarships. Could someone help me please?

thanks.

[simon13]

Under deductions & credits you should go to the education section.  Then input your daughter's tuition expenses.

[PagosaPastor]

I have done that. But for some reason under the Scholarship and Financial Aid section, where I list the scholarship amount she has received, it says that this is taxable. Why is it saying that? She has over $9000 in expenses listed, and only $3000 in scholarships. All scholarship money went to pay for the $9000 in expenses.

[JohnB5677]

Based on the IRS:  IRS on Scholarships

If you receive a scholarship, a fellowship grant, or other grant, all or part of the amounts you receive may be tax-free. Scholarships, fellowship grants, and other grants are tax-free if you meet the following conditions:

• You're a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
• The amounts you receive are used to pay for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution.

So two questions:

1. Was she a candidate for a degree?  Be sure you indicated she was a full time  student.
2. Were the tuition and fees greater than the "scholarship"?  You've already indicated that it was.

[PagosaPastor]

Yes she is a candidate for a degree, and a full-time student. I'm wondering if I have input something wrong. Yes her tuition and fees were way higher than the scholarships. How do I check to make sure something isn't entered incorrectly?

Thanks!

[NCperson]

if your daughter is your dependent, the 1098T form goes on YOUR tax return , NOT her's. (assuming Box 1 exceeds Box 5)

please post what is in Box 1 and Box 5 of form 1098T and I can help you straighten this out. 

[PagosaPastor]

Box 1 is $9125. Box 5 $3535. My daughter is my dependent. I have placed these values (I think at least if I did it right) in Turbotax.

[NCperson]

you should be placing the form on YOUR tax return - not her's  - as she is your dependent.  did you do that? 

you should see a $2500 credit for AOTC on your tax form.  (delete the 1098T and then re-enter to confirm how much your taxes change by) 

are you using Online or Download version of TT

[PagosaPastor]

Thanks. Yes, it is on my return not hers.  I don't see the $2500 credit has been applied (how do I check?), and I did place this on my return not hers. How do I delete the 1098T in TurboTax? I will see if I can figure that out, delete it and re-enter. Thanks so much for your help. I really appreciate it!

[PagosaPastor]

Ok I was able to go on my forms list and select the 1098-T as well as the student info worksheet and correct some things that were wrong. I know show having the $2500 American Education Credit, and it changed to non-taxable on the scholarships, so thanks for all your help! For reason using the wizards and the questions in TurboTax didn't produce the right results, but looking at the forms manually and finding where I missed inputting information fixed the issue.

I sure appreciate all the help!