Can my scholarships be treated as nontaxable income? My tuition well exceeds my scholarships, but my scholarships are currently being treated as taxable income.

Forum|Forum|4 years ago
April 12, 2022
2 replies
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My 1098-T box 1 is $58,900, my box 5 is $36,120. My understanding was that if tuition exceeded scholarships, they were not taxable income.

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Best answer by Hal_Al

You've entered something wrong, It's best to delete the 1098-T and re-enter it. If you are not claiming a tuition credit, you do not even have to enter the 1098-T.

The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly your student has taxable scholarship income.

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. In 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. You will also reach a screen that allows you to adjust the scholarship amount for "amounts not awarded for 2021 expenses".

MinhT1

You are correct. As your tuition far exceeds the scholarships, these scholarships are not taxable.

You can use part of your tuition to claim education credits if you are eligible. But even doing so will not make your scholarships taxable.

Please note that if you are a dependent of your parents, then only your parents can claim your education credits.

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Hal_AlAnswer

Employee

You've entered something wrong, It's best to delete the 1098-T and re-enter it. If you are not claiming a tuition credit, you do not even have to enter the 1098-T.

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)

memandryAuthor

Thank you for taking the time to reply. Glad to hear that my intuition was correct and that my scholarships should not be taxed income. I tried following your advice to delete the 1098-T and reenter it. I even had the computer pull it in for me from a picture of the 1098-T. When neither worked, I cleared the return and started from the top again. Each time, as soon as I enter my 1098-T, my W-2 Wages and Tips increases by the amount of my scholarship. I tried putting in a lower scholarship amount just to see, and even $200 is getting flagged as "Wages and Tips".

I know that this is more of an IT issue than a "tax" issue, but do you have any idea for what might be causing this? I am a full-time graduate student and none of the scholarship is being used for housing or other expenses. Just tuition. Thank you again for your response.