My son attended college full time in 2020. I received no 1098-T. I paid tuition and he received scholarships. how do i record this in my return?

Forum|Forum|4 years ago
May 3, 2021
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Hal_Al

Employee

Enter the education interview. When asked if you got a 1098-T, say no. Answer yes when asked if you qualify for an exception. A form 1098-T was made a requirement for the education credits a couple of years ago. However, if you qualify for an exception, you may still claim the AOC, without a 1098-T. If you attended an eligible institution, you most likely qualify for an exception. Scholarships being more than tuition is a common reason for the school not issuing a 1098-T

"However, a taxpayer may claim one of these education
benefits if the student doesn’t receive a Form 1098-T because
the student’s educational institution isn’t required to send a
Form 1098-T to the student under existing rules (for example, if
the student is a nonresident alien, has qualified education
expenses paid entirely with scholarships, or has qualified
education expenses paid under a formal billing arrangement). If a
student’s educational institution isn’t required to provide a Form
1098-T to the student, a taxpayer may claim one of these
education benefits without a Form 1098-T if the taxpayer
otherwise qualifies, can demonstrate that the taxpayer (or a
dependent) was enrolled at an eligible educational institution,
and can substantiate the payment of qualified tuition and related
expenses".

https://www.irs.gov/pub/irs-pdf/f8917.pdf

Hal_Al

Employee

There is a tax “loop hole” available. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), 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 she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.

Books and computers are also qualifying expenses for the AOC. So, extending the example, the student had another $1000 in expenses for those course materials, paid out of pocket, she would only need to report $5000 of taxable scholarship income, instead of $6000.