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1098-T

Forum|Forum|1 year ago
January 30, 2025
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My son, who we claim as a dependent, had to use some of his scholarship to pay for room and board making it taxable. We were told that both him and us should add the 1098T to our return. I did the math wrong on ours and put $800 went toward room and board but didn’t realize I was wrong until after I submitted our taxes. His taxes will have the correct number of $2,300. Do I need to file an amendment for our taxes? He does have to file since he had over $12,000 from working during the year.

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Best answer by Hal_Al

Q. Do I need to file an amendment for our taxes?

A. It depends on the bottom line, on your tax return. Assuming you are eligible for the tuition credit (your income is not too high), you should have used $4000 of tuition to claim the American Opportunity credit (getting a $2500 credit, in two pieces, $1000 & $1500). If that's the bottom line, do not amend. All that entry detail is not sent to the IRS.

What your son enters does not have to agree entirely with your entries (other than the $4000, of qualified expenses, used by the parents to claim the credit on their return).

There's a simple way to enter it on his return. Manually calculate the mount of taxable scholarship and enter a 1098-T with 0 in box 1 and the taxable amount in box 5. Enter no other numbers.

The simple way to enter it on your return would have been to enter a 1098-T with $4000 in box 1 and 0 in box 5. Enter no other numbers.

Q. He does have to file since he had over $12,000 from working during the year. Correct?

A. The filing threshold is $14,600. So, it depends on how far over $12,000 he is. $12,000 wages + $2300 taxable scholarship = $14,300. Even if less, he should file, to document the use of the "loop hole" ( I assume that's why he "had to use some of his scholarship to pay for room and board".

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ThomasM125

I think you mean you reported more for qualifying education expenses then you were entitled to on your tax return. You would have to prepare an amended return to see if your tax increased when you correct the education expense entry and if so, file the amended return.

Your son would most likely have to file a return if his income was over the standard deduction, which is $14,600 in 2024 for a single filer. He could us this IRS tool to determine if he needs to file a tax return. If he is not required to file a tax return, he can still do so to get a refund of taxes withheld from his pay (box 2, 17 or 19 on his W-2 form ).

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Hal_AlAnswer

Employee

Q. Do I need to file an amendment for our taxes?

A. It depends on the bottom line, on your tax return. Assuming you are eligible for the tuition credit (your income is not too high), you should have used $4000 of tuition to claim the American Opportunity credit (getting a $2500 credit, in two pieces, $1000 & $1500). If that's the bottom line, do not amend. All that entry detail is not sent to the IRS.

What your son enters does not have to agree entirely with your entries (other than the $4000, of qualified expenses, used by the parents to claim the credit on their return).

There's a simple way to enter it on his return. Manually calculate the mount of taxable scholarship and enter a 1098-T with 0 in box 1 and the taxable amount in box 5. Enter no other numbers.

The simple way to enter it on your return would have been to enter a 1098-T with $4000 in box 1 and 0 in box 5. Enter no other numbers.

Q. He does have to file since he had over $12,000 from working during the year. Correct?

A. The filing threshold is $14,600. So, it depends on how far over $12,000 he is. $12,000 wages + $2300 taxable scholarship = $14,300. Even if less, he should file, to document the use of the "loop hole" ( I assume that's why he "had to use some of his scholarship to pay for room and board".

Hal_Al

Employee

There is a tax “loop hole” available to claim an education credit, for the parents of students on scholarship. 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 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 (by allocating that money to room & board and/or other expense, rather than tuition), 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.

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”.

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SjmusserAuthor

Apparently I should have asked these question prior to submitting my return…..box 1 of his form shows 3,989.40. Box 5 is $6,708. When we added this info to our taxes it said we didn’t get a credit because of the excess scholarship number (I didn’t know about the loophole). He did have an additional $360 of school required expenses. How much would my son have to take as income for us to get the credit and I can submit an amendment with the loophole and get the credit or am I out of luck at this point? Thanks so much for your insight!