Do full-time undergraduates need to pay tax on scholarships? (1098-T)

Forum|Forum|5 years ago
March 11, 2021
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I am an undergraduate at a full-time college in another state. (I am claiming residency in my home state, which I am allowed to do.)

Both of my parents are living. They can claim me as a dependent.

I have a 1098-T with approx. $53,000 in box 1 (payments received for qualified tuition and related expenses) and approx. $20,000 in Box 5 (Scholarship or grants).

TurboTax says I need to pay federal income tax on the $20,000. This happens whether I tell TurboTax that my parents are taking me as a dependent or not.

Is this right?

Scholarships

Best answer by Hal_Al

Q. Is this right?

A. No. You've made an entry error. Just delete the 1098-T. It does not need to be entered on your tax return*.

Scholarships that are used for qualified expenses (tuition, fees, books and other course materials) are tax free. Since box 1 of the 1098-T exceeds box 5, none of your scholarship is taxable.

Your parents should enter your 1098-T, on their return, to claim the tuition credit, if they are otherwise qualified (income is not too high).

*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 deduction or possibly your student has taxable scholarship income. You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T.

If your parents claim the tuition credit, they do need to report that you got one (the TurboTax interview will handle this)

Hal_AlAnswer

Employee

Q. Is this right?

A. No. You've made an entry error. Just delete the 1098-T. It does not need to be entered on your tax return*.

Scholarships that are used for qualified expenses (tuition, fees, books and other course materials) are tax free. Since box 1 of the 1098-T exceeds box 5, none of your scholarship is taxable.

Your parents should enter your 1098-T, on their return, to claim the tuition credit, if they are otherwise qualified (income is not too high).

If your parents claim the tuition credit, they do need to report that you got one (the TurboTax interview will handle this)