Student info worksheet section 6, Line 15 tax free assistance is reducing my tuition paid, even though that amount on Line 1 form 1098-T is not including the scholarship.

[KatBrown999]

My daughter received a 1098-T from her college, which effectively reduces the price of her tuition.  This is NOT an outside scholarship being paid to the school. The amount included in Line 1 ($8565) appears to be the payments we made for Fall 2020 minus her room and board plus amounts we paid for Spring 2021 minus her room and board. (It's a little lower than what I paid, but I suspect some school fees are not considered as QEE for the 1098T form.  Line 5 = $4823 and line 8 - half-time student is checked.  There is nothing in lines 204,6,7.

For both semesters, I paid a total of $8763 (not including Room and Board), even though the cost of school would have been $4823 more for each semester.  (Note that the scholarship on line 5 only reflected Fall 2020, not spring 2021).

In addition I have added 6300 room and board for both semesters, since I paid it all in 2020, and $636 for a computer.

On the Student Worksheet section 6 Line 13 is $15501 ($8565+6300+636)

I plan to take the AOTC, so to calculate my 529 plan, I would deduct that, so I expect line 19 Total adjustments to say $11501 ($15501-$4000). But instead, it also took off the $4832 on line 15 Tax-free assistance. Now the total is $[social security number removed]=$6669 that I can use as QEE for my 529.  But I do not think the $4832 should be deducted, because the $15501 is my ACTUAL payment total to the school (except for the computer) and does not include the scholarship.  If we had not gotten the $4832 scholarship, then her tuition payment would have been $8763+4832+4832=$18427. 

I would expect that my QEE would be:

[1098TLine 1] + [Room and Board] + [computer] - [AOTC]

8565+6300+636-4000=$11501. 

Had this been an outside scholarship, I would have expected that amount to be added to Line 1 on the 1098T form as a form of payment.  But since the scholarship is not included in Line 1, and effectively is NOT considered a payment, I would expect it to be ignored and not used to adjust the 529 QEE.

Any thoughts?

[KrisD15]

The TurboTax program can only compute from the forms that are entered into the program. 

Whatever is in Box 5 on a 1098-T should also be included in Box 1 of the same 1098-T.

Box 1 is not what YOU paid to the school, it is payment made to the school in that tax year. If the scholarship was internal, the amount should be in Box 5 AND Box 1 if it posted that year. That is the purpose of the 1098-T, to tell tax software what was paid in that tax year. 

It sounds like the school may have reported the 1098-T incorrectly. 

You can adjust for this in the TurboTax program, but I suggest you keep a copy of the student's school account statement with your tax file to prove what was paid and when. 

Once you are sure of the numbers, you can click "This is not what I paid" under Box 1 on the 1098-T entry screen and enter the proper amount. Box 1 should be reporting EVERYTHING the school received in 2020 for that student for paying tuition and fees. This would include scholarships. 

If a scholarship is posted on a 1098-T, but is for a different tax year, enter that amount on the "Aid for a different year" screen. 

If the 1099-Q was used entirely for room and board, the 1099-Q and the amount of room and board need not be entered. 

They would cancel one-another out. 

IRS Pub 970

[KatBrown999]

Hi KrisD15,

I really appreciate this answer.  However, I am wondering if you can clarify something.  When I read on the IRS website how the college's should fill out the 1098-T, I do not see where it says line 1 would include the universities scholarship.   It does say that this line is not reduced by line 5, but doesn't say it should INCLUDE it.  Am I just misinterpreting this?    I have been trying to get a clarification from the college as to how they calculated this, and I just want to understand what Line 1 should have.  Below is how  the IRS describes this line:

Box 1. Payments Received for Qualified Tuition and Related Expenses

Enter the total amount of payments received for qualified tuition and related expenses from all sources during the calendar year. The amount reported is the total amount of payments received less any reimbursements or refunds made during the calendar year that relate to the payments received for qualified tuition and related expenses during the same calendar year. The amount reported is not reduced by scholarships and grants reported in box 5. Include in this box the receipt of a payment of past-due qualified tuition or related expenses from a previous calendar year, but only if the educational institution previously billed the student for such amount(s).

[AmyC]

Right, box 1 is tuition paid- regardless of who paid it or how, box 5 is scholarships. You mentioned a 529 as well and getting AOTC. See my 529 example and look at another of my answers for help. Let's make sure you get all the deductions and credits you should!

[KatBrown999]

Well, in that case I am clueless as to why my 1098T line 1 isn't higher.  Back to the school... UGH!

Thank you!