My son, age 21 was a full time college student and is claimed as a dependent. Why does turbotax want his 1098-T since I enter this on my tax returns?

Forum|Forum|6 years ago
May 3, 2020
3 replies
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Should I just not enter the 1098-t on his return and instead do it on mine? Otherwise it says he owes a large amount of money since scholarships exceed tuition. He also studied abroad through SFS(school of field studies) which is a program through college but takes place in a foreign country and all his expenses were toward that.

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macuser_22

Employee

Only you can claim the educational credits since he is a dependent.

The 1098-T must also go on his tax return because if the box 5 scholarship exceeds the box 1 tuition then that is taxable income to him. Scholarships are for the student, not you, so taxable scholarships are the students taxable income.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

Hal_Al

Employee

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.

But, using the 1098-T screen, is usually the best way to enter either the tuition credit or report taxable scholarship. So the 1098-T can go on either return or even both.

The TurboTax interview can handle either situation, but it's complicated. A workaround is usually needed. If box 5, of the 1098-T exceeds box 1 , your student usually has taxable scholarship income. Scholarships that pay for Qualified Higher Educational Expense (QHEE) are tax free. Study abroad, particularly the travel and living expenses, are not QHEE

Hal_Al

Employee

Even though your student has taxable scholarship income, you may still be able to claim a tuition credit.

There is a tax “loophole” available. The student reports all his scholarship, up to the amount needed to claim the American opportunity credit, 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 he reports $6000 as income on his return, the parents can claim $4000 of qualified expenses on their return.