Education Credit

Forum|Forum|6 years ago
May 1, 2020
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My daughter received a 1098-T with a scholarship amount in item 5. In item 1 the amount is zero.

The scholarship paid for tuition, however she also received a refund of credit balance. That balance was because of student loans money from 2018 and 2019 which was not used. From what I can tell this refund of the student loans is the reason item 1 is zero. I understand that this causes her to appear she received the scholarship and does not have any tuition expenses and therefore not eligible for tax credit. She also has to claim this scholarship money as income. But the scholarship paid for the tuition expense.

Is there a way to count the tuition as an expense even though the 1098-T shows zero in item 1.

Hal_Al

Employee

You seem to be using the terms "student loans" and "scholarships" interchangeably. They are not treated the same for taxes. Expenses paid by loans is considered paid by you. Money "refunded" from loans is irrelevant (it was always the student's money). No part of loans is income.

The 1098-T is only any 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.

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 2019 expenses".

If it gets too complicated entering info in the TurboTax interview, just fudge the box 1 and box 5 numbers at the 1098-T screen to agree with your records. Keep those records, in case of an audit.