Education credits / scholarships

Forum|Forum|6 years ago
April 6, 2020
2 replies
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My son did a paid summer internship (chemistry) at the University of Iowa. That is not his regular school. He attends Wheaton College in Massachusetts. They send me a 1098-T each year, which I am accustomed to dealing with. The University of Iowa did not send a 1098-T, but I have a "substitute". According to this, his stipend (?), or payment for his paid internship has been considered a scholarship (Box 5 on a 1098-T). I'm unsure of how to claim this. Oh, we claim him as a dependent. Can anyone help?

KrisD15

Yes, when you enter the 1098-T from Wheaton College, continue through the interview. The program will ask if the student received any other scholarships. You may select "Yes" and enter the amount from Box 5 from the University of Iowa.

If only Box 5 is populated on that 1098-T, you do not need to enter it, just the amount of the scholarship.

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Troutbum89Author

Thanks. This (Iowa's approach) just strikes me as strange. This is basically income for him, not really a scholarship in any traditional sense. They have reported it as a scholarship, which I assume will affect the equation for education credits, even though it does not apply directly to his tuition. It's more like a summer job. I'm quite frustrated by it. The way they have done this is most likely to hurt me rather than helping him. If it were regular income for him, he wouldn't even have to report it. Thanks for your help, though.

Hal_Al

Employee

Q. This (Iowa's approach) just strikes me as strange.

A. It's frequently done that. I'd say more often than not.

Q. They have reported it as a scholarship, which I assume will affect the equation for education credits.

A. No. Because it is being reported as income, on your son's return, it is not tax free scholarship. So it does count against the education credit. You do not report the UI 1098-T on your return.

Q. The way they have done this is most likely to hurt me rather than helping him. If it were regular income for him, he wouldn't even have to report it.

A. Just the opposite. As scholarship, rather than wages, he pays no FICA tax. As explained above, you still get the tuition credit.

Hal_Al

Employee

How much is the stipend for? Does he have any other income. If his total income is less than $12,200, he does not need to file a tax return or report that income. This assumes that he also has less than $1100 of investment income (interest, dividends, capital gains, taxable 529 distributions.

If it's more, he enters the UI 1098-T on his return, at Education expenses (not in the income section of TT). He enters no education expenses. The income will go on line 1 of form 1040 with the notation, SCH