1098t scholarship taxable income and treaty exemption

Forum|Forum|3 years ago
February 19, 2023
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My 1098t box5 (scholarship and grant) are all listed as tuition remission but are 4000$ larger than box1 (expense received)

1. where does the difference come from I never actually received any money from scholarships and grants?

2. is the 4000$ taxable income and should be reported in my tax return?

3. I am a Chinese citizen with f1 visa, so can I apply treaty 20b for the 4000$ difference and 20c for 5000$ tax-free income together? If so can I put -9000$ in my miscellaneous income and e-file while mailing an additional 8833 form to IRS so I don't need to mail the return for faster processing?

Thanks for answering.

Scholarships

DaveF1006

Yes, the $4000 will be reported as taxable income on your return. If this is entered from a 1098T, the income will be reported automatically on Line 8R on Schedule 1 and then transferred to your Line 8 on your 1040.

As far as the specifics of your Scholarship income reported, it is true you may not received it directly but may have been used to pay down your student loan. You may need to contact your school directly to find out specifically on how the scholarship/fellowship was applied.

According to this unofficial source, If you are Chinese and in the U.S. solely for the purpose of your education, you may be able to exclude up to $5,000 of income that you receive from work performed in the U.S. Under the U.S.-China treaty, taxable scholarships and fellowships are also excluded from income. In my opinion, the term taxable scholarship means the taxable part of the scholarship will be excluded, which is $4000. Here is how to report.

Click on Wages & Income at the top of the screen
Scroll down to All Income and click on it if needed to open
Scroll all the way down to the bottom of the screen
Click on Less Common Income
Scroll all the way down to Miscellaneous Income, click start
Scroll all the way down to Other Reportable Income
Under description, enter US/China treaty exemption and then enter as -4000. This will educe your taxable income on your return by $4000.

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iris997Author

Hi again,

I applied the US-China tax treaty article 20b to this $4000 scholarship when reporting federal tax, but when I go to California state tax, since I cannot apply US tax treaty to state income so I have to add it back. But Turbotax only has the option to enter the amount in W2 that's been exempted by the treaty and I cannot modify the scholarship part, how should I report this? Thank you so much!

Best,

DaveF1006

You may enter this as an income adjustment on your Ca tax return. As you begin working on your California return, you will reach a page that says:

Here is the Income California handles differently.
Scroll to the very bottom of this page and select, other adjustments to income.
Give a description of the income you are adding back, hen enter the amount of the scholarship under addition. Now your California income will increase by $4K.

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