1098-T Tuition for spring 2019 charged in 2018 results in scholarship money being taxable income

Forum|Forum|6 years ago
April 5, 2020
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My daughter graduated college in spring of 2019. She had a 4 year full tuition scholarship. The tuition for spring 2019 was charged in December 2018. So, 1098-T Box 1 reads $950 and Box 5 reads $11,900. The $950 was various fees. This is causing her to pay income tax on the tuition scholarship money. I did not claim her as a dependent for 2019 as she graduated and provided over 50% of her own support.

Question 1: Should she select the "What if this is not what I actually paid" and enter the correct amount for spring 2019 tuition?

Question 2: Is there any way to avoid paying income tax on this tuition scholarship money that should have been tax free?

KrisD15

Box 1 on a 1098-T reports what was paid in the tax year. Even if the spring tuition was billed in December, it should not have been in Box 1 on the 2018 1098-T unless it was paid in 2018.

The scholarship in Box 5 on the 2019 1098-T can be allocated to a different year, if that is what it was applied to. However, if it paid for tuition that was reported in Box 1 on the 2018 1098-T, you will need to check your return (since you claimed her for tax year 2018) and see if you used those expenses for an education credit.

ACCORDING TO THE IRS:

“Refunds. A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year.”

IRS Pub 970

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