College billed us 12/2018 for Spring 2019 Semester

Forum|Forum|6 years ago
March 11, 2020
1 reply
0 views

Northwood U. MI billed us Dec 2018 for January 2019 Semester, we understood if payment not in Business Office by 02 January 2019, student would be dropped from classes. We sent E-Check for $9,712.54 on 26 December 2018. The 2019 Form 1098-T Box 1/2 are blank since Spring 2019 Tutition was billed and paid in 2018. However Block 5 shows the $3,500.00 Scholarship and Turbo Tax tells us we must pay income tax on this scholarship money. Only other info on form is Box 8 checked as at least half time student. How do we complete Turbo Tax to not have to pay tax on money we never saw? Our son is claimed as a dependent.

JulieS

Yes, the scholarship is taxable unless it was spent on qualified education expenses in 2019. If you used the tuition paid at the end if 2018 on your 2018 return, you can't use it again for 2019. But, there are other qualified education expenses.

Expenses like books, fees and supplies can be used to show that your scholarship, or at least part of it, is not taxable.

To be qualified education expenses, books, fees, supplies and equipment must be required for all students taking the same courses.

Non-qualified expenses include:

Books, fees, supplies and equipment that are not required for all students taking the same courses.
Room and board.
Travel
Research.
Clerical help.

Click here for more details.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

perdue9590Author

I was really looking for way to not pay tax on the Scholarship $3500.00.

We were not given a check for this money by the college. They just subtracted $3500.00 from the tuition which was $12,855.00 plus Fee $$'s. We paid $9712.54 by E-check when billed back on 26 December 2018. Then the college subtracted the scholarship on 29 January 2019. We never saw money or check, only a line on the Billing Statement ..... 01/29/19 -3,500.00.

Maybe this clarifies things better.

Les P. (Dad)

KrisD15

You don't have to claim the scholarship refund that was made in 2019 if it was for 2018, but you also must not have used those same expenses for a credit on your 2018 tax year return.

You need to look at your 2018 tax year return, did you get an education credit? If so, look at the 2018 tax year form 8863, how much in education expenses did you have for the credit?

If you received the American Opportunity Tax Credit, that credit maxes out at 4,000.

If you received the Lifetime Learners Credit, that can use up to 10,000 in expenses.

If the refund changes the status of the 2018 credit, it needs to be "Re-captured".

If the 3,500 would have made no difference on your 2018 tax return, there is nothing you need to do, it is not taxable income for 2019.

According to the IRS:

“Credit recapture. If any tax-free educational assistance for the qualified education expenses paid in 2018 or any refund of your qualified education expenses paid in 2018 is received after you file your 2018 income tax return, you must recapture (repay) any excess credit. You do this by refiguring the amount of your adjusted qualified education expenses for 2018 by reducing the expenses by the amount of the refund or tax-free educational assistance. You then refigure your education credit(s) for 2018 and figure the amount by which your 2018 tax liability would have increased if you had claimed the refigured credit(s). Include that amount as an additional tax for the year the refund or tax-free assistance was received.” (2019)

IRS Pub 970

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"