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Solved

New Student Fee not listed on 1098-T

Forum|Forum|3 years ago
February 4, 2023
2 replies
0 views

I paid a required $225 New Student Fee for my child's freshman semester. This was part of the Box 1 in the 1098-T. Where should this be entered into TT. I suspect it gets entered on the Page "Did XX Pay for Books and Materials to attend school," in the box labeled "Books and materials required to be purchased form the school." She also had a $50 Wellness Fee. Is there anywhere to enter this. I paid these fee through a 529 distribution, although, I don't think that is relevant to where they get entered in TT.

Thanks.

Best answer by Hal_Al

Q. I suspect it gets entered on the Page "Did XX Pay for Books and Materials to attend school," in the box labeled "Books and materials required to be purchased form the school."?

A. Yes, you can enter it there. But, if "This was part of the Box 1 in the 1098-T", you don't enter it again. It's already accounted for.

Q. She also had a $50 Wellness Fee. Is there anywhere to enter this?

A. Yes, you can enter it in the same place. The fee counts if it was "required for attendance" and is paid by all students.

Alternatively, at the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid, including those fees.

The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return.

If you claim the tuition credit, you do need to report that you got one or that you qualify for an exception (the TurboTax interview will handle this)

You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. The 1098-T that you enter in TT is not sent to the IRS.

Hal_AlAnswer

Employee

Q. I suspect it gets entered on the Page "Did XX Pay for Books and Materials to attend school," in the box labeled "Books and materials required to be purchased form the school."?

A. Yes, you can enter it there. But, if "This was part of the Box 1 in the 1098-T", you don't enter it again. It's already accounted for.

Q. She also had a $50 Wellness Fee. Is there anywhere to enter this?

A. Yes, you can enter it in the same place. The fee counts if it was "required for attendance" and is paid by all students.

Alternatively, at the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid, including those fees.

The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return.

If you claim the tuition credit, you do need to report that you got one or that you qualify for an exception (the TurboTax interview will handle this)

You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. The 1098-T that you enter in TT is not sent to the IRS.

vasto7Author

Thank you. That was exactly what I needed to know.

I hope you can verify one other thing that has been perplexing me. I'm paying all tuition, fees, room and board, minus a $7,500 scholarship, through a 529 distribution. This leaves no money to claim the American Opportunity Tax Credit. However, I verified from the school that there is no stipulation that this scholarship be used on tuition. So, in TT I assigned a portion of the scholarship to room and board. After assigning about $4,000 (not exactly because I had some small expenses not paid by the 529 distribution) TT told me I could get the AOTC credit. I then went into my daughters return and filled in the 1098-T information. On her return the now taxable scholarship is treated as ordinary income and her standard deduction covers the entire amount. Is all of the above Kosher?

Thanks again for your help.

Employee

Q. Is all of the above Kosher?

A. Yes. 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”.

Kudos for figuring out how to enter it in TurboTax! Many users struggle with it. Technically, your daughter is not required to file a return (her income is less than $12,950). But, you may want to have her file anyway to document the reporting of the $4000 of scholarship income (which allows you to use $4000 for the AOTC).

__________________________________________________________________________________________

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.

does this “loop hole” work for 2023 if the filer is the student. Obviously my box 5 is higher than box 1 but I also have income where do pay have payroll tax and child dependents. It seems that my tax return is wiped out to if report my 1098T in full in that section. I’m senior in college but I work full time also.

do I report the offer grant amount in other “income” in W2 section and leave block 5 blank on the 1098T input area?

Employee

Q. Does this “loop hole” work for 2023 if the filer is the student.

A. Yes, if the student is not and and can not be claimed as a s dependent, by someone else.

Q. It seems that my tax refund is wiped out to if report my 1098T in full?

A. That is possible, if your scholarship income is high enough to push you total income (AGI) down the Earned Income table, to where you're getting less EIC (Earned Income credit). It should not effect your Child Tax credit/Additional Child tax credit.

But, the American Opportunity Credit is generous enough (up to $2500) that it should offset some of that loss, even though it appears that your reporting even more income. The only way to be sure, is change the numbers and compare the result. Change it back, if it doesn't work.

Q. Do I report the offer grant amount in other “income” in W2 section and leave block 5 blank on the 1098T input area?

A. No. You adjust the inputs at educational expenses section. The simple method is to increase the amount of the scholarship allocated to room and board.

Using the example above,

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 can not claim the American opportunity credit (AOC or AOTC). But if she reports $6000 as income on her return, she can claim $4000 of qualified expenses on her return, for the AOC. How to do that? Enter the 1098-T, as received. When asked if any was used for room and board, answer yes. Then enter the amount you want to be taxable ($6000 in the example), in the pop up box. R&B are not "qualified educational expenses". 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 income on line 8r of Schedule 1.