Simple answer: yes. After entering the 1098-T, you will be asked if there were any others scholataships not included on the 1098-T. That's where you enter the Pell grant.

But, if you need to declare some of the Pell grant to be taxable, so that you can use some of the tuition to claim an education credit, that is allowed. You will be asked if any of the scholarship was used for room and board. At that place, you enter the taxable amount. . Note the wording at that screen “or other expenses”. You didn’t have to literally use the scholarship for R&B.

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There is a tax “loop hole” available. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), as income on his return. That way, the parents (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship. You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.

Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.

Books and computers are also qualifying expenses for the AOC. So, extending the example, the student had another $1000 in expenses for those course materials, paid out of pocket, she would only need to report $5000 of taxable scholarship income, instead of $6000.

travislankAuthor

Thanks for the reply, but I'm still confused. All the Pell Grant money went through the school and was used to offset total tuition due. $0 R&B. There is only the tuition cost in box 1, of 1098-T, there is nothing in any other box.

ThomasM125

The tuition in box 1 was what the school charged for tuition. The Pell grant paid that tuition. Normally, it would be reported in box 5 on the 1098-T as scholarship income. Even though it wasn't reported, you may still need to report it when asked if there was any scholarship income that wasn't reported on the 1098-T form.

What @Hal_Al is saying is that you have the option of having your parent, assuming they claim you as a dependent on their tax return, report the form 1098-T as is and not report the scholarship income. If they do that, then you have to report the scholarship income on your tax return as income. That may allow your parent to claim an education credit on their tax return and you claim the income on your tax return. If you don't choose to do that, however, then you need to report the tuition and scholarship income on your tax return, as I mention above.

The take away is that both the tuition and scholarship income should be reported on either your or your parent's tax return.

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