Grad Health Insurance and 1098-T

Forum|Forum|5 years ago
January 30, 2021
4 replies
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I am a graduate research assistant, so I am employed by my university. I get a W2 and all of my fees paid for, including health insurance, as a benefit of my employment. Box 5 on my 1098-T includes the money paid for by my employment for health insurance. I've seen conflicting info on if this is taxed - as I understand it, if this was from a fellowship or something, it would be taxed. But this is from my employment, so I think it should not be? Is it not the same as if I had a normal industry job that paid for my health insurance premiums, which is normally an untaxed benefit?

If I'm correct that it's untaxed, should I enter it as tax-free employer provided assistance or as something else?

Thanks!!

Hal_Al

Employee

It's not clear what's going on there. Employer paid health insurance is not reported in box 5 of a 1098-T, even at a university. If anywhere, it's in box 12 or box 14 of the W-2. The most likely explanation is you're confused.

But the simple rule is that anything in box 5 is tax free if used for qualified educational expenses (QEE). Your QEE are shown in box 1 of the 1098-T. The difference between the two is taxable income (if box 5 is more than box 1). You may reduce the taxable amount by any other QEE you have, not shown in box 1. e.g. books.

Anonymous

To clarify - it is not on my W2. My situation is a little unique in that I am the employee of a national lab affiliated with my university. They pay for my health insurance through fee remissions, which is why they show up on my 1098-T rather than a W2. I am certain that this fee on my box 5 was for health insurance. The insurance is definitely a benefit of employment though - if I was not employed, it would not be paid for. (This is not a fellowship or grant either). In past years when I was employed through the university directly, the health insurance was still a tax-free benefit of my employment, and was not on the 1098-T or the W2. I believe that it only showed up differently this year because of the national lab affiliation.

AmyC

Employee

Under the Affordable Care Act, health insurance is not taxable. Call the issuer and find out where the numbers are coming from.

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KrisD15

You should speak with the HR department.

If it were reported on the W-2, you're right, it would not be taxable income.

Reported in Box 5 of the 1098-T does make it taxable.

In order to treat the funds as employer provided health insurance, it would need to be reported on your W-2.

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hln1994

You will need to pay tax for the insurance.

See https://www.irs.gov/credits-deductions/individuals/qualified-ed-expenses

Expenses that Do Not Qualify

Even if you pay the following expenses to enroll or attend the school, the following are not qualified education expenses:

Room and board
Insurance
Medical expenses (including student health fees)
Transportation
Similar personal, living or family expenses

KrisD15

Please do not get confused about the expense for Heath Insurance.

The list above are expenses which cannot be used towards an education credit, and also cannot be applied against a tax-free scholarship.

Expenses not eligible for the credit MAY be used by a 529 Distribution or allocated to assistance claimed as income, such as a scholarship.

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philipsutter

My son has school provided health insurance amounts included in 1098-T Box 5. The insurance is NOT included in the “qualified” expense amount in Box 1.

At his school, health insurance is mandatory & students are auto enrolled in the plan, but may waive it. He’s not eligible anymore for the American Opportunity Tax Credit (AOTC).

In IRS publication 970, health insurance is not listed in Chapter 1 as either a qualified education expense or as an expense that doesn't qualify. However, it is listed in the succeeding section regarding eligibility for credits such as with the AOTC as an expense that doesn't qualify. But, since he is not eligible for AOTC, that section seems like it is not relevant.

So, may he deduct the insurance? If so, how is the deduction made (such as either adding it to Box 1 or subtracting it from Box 5?

Why is this situation ignored by the IRS and Turbo Tax for that matter?

Sulgin

Did you get this figured out? I'm in the exact same situation this year.

KrisD15

If a University supplies health Insurance to a student it could be reported in Box 5 of a 1098-T since Health Insurance Premiums are not considered as an education expenses, but I would ask why, rather than posting on the 1098-T (taxable) they don't report it on a W-2 (non-taxable)

If it's reported in box 5 of your 1098-T, it would need to be matched to a Qualifying Education Expense in order to be considered tax-free.

According to the University of Connecticut:

“Since insurance (both medical and dental) is not considered to be a qualified tuition and related expense, this expense it is not reported on your Form 1098-T. However, if the University subsidizes the cost of your insurance then the University subsidy is reported in Box 5 of the Form 1098-T.”

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