My high school student took college courses. He received grants that were less than his program costs and fees. Why does it say it should be counted as income?

Forum|Forum|4 years ago
May 15, 2021
2 replies
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1098-T form Box one is $1577 (payments for qualified tuition) and box 5 is $1290 (scholarships or grants)
Message comes up that the $1290 is income when it didn't even cover the total cost of the tuition and it was paid directly to the school

TurboTax Self Employed Online

AmyC

Employee

The only way to make it taxable is if you chose to claim a larger education credit, then there could be income. If you are claiming lifetime based on the difference or no credit, there is nothing taxable. Check to see what you are doing on your Form 8863.

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Hal_Al

Employee

@AmyC said "The only way to make it taxable is if you chose to claim a larger education credit"

For dual credit courses, the scholarship money is almost always "restricted" to being used for tuition. So the loop hole option, of having the student declare it as taxable, is not available to the tax payer.

Hal_Al

Employee

You've entered something wrong. When done right, the program will allow you to claim $287 toward a tuition credit or deduction.

The ability of the parent of a high school student to claim the credit or deduction is limited. If these courses are provided by an eligible college, this cost qualifies for the Lifetime Learning Credit (LLC). The school must have policy of granting college credit for that course, already taken, if the student ever enrolls there. In other words, it is a requirement that the course be a college credit course, even if the student isn't currently a college student. It’s not that the student is post secondary, it’s that the course is post secondary. Books are not a qualifying expense, unless included in the course fee.

Alternatively, such courses now qualify for the Tuition & Fees deduction, instead of the LLC, but only if tuition is paid to the college and not the high school. (http://www.nytimes.com/2012/04/15/education/edlife/now-deduct-this.html?_r=0 ).

High school students are not usually eligible for the more generous American Opportunity Credit, unless they are officially enrolled as a degree candidate. From pub 970: "Example 3. During the 2015 fall semester, Larry was a high school student who took classes on a half-time basis at College X. Larry wasn't enrolled as part of a degree program at College X because College X only admits students to a degree program if they have a high school diploma or equivalent. Because Larry wasn't enrolled in a degree program at College X during 2015, Larry wasn't an eligible student for tax year 2015." Reference: https://www.irs.gov/publications/p970/ch02.html