Nonqualified Scholarship

Forum|Forum|3 years ago
March 3, 2023
2 replies
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My son is a college senior whose school provides him a scholarship for part of his tuition. He was paid $6,000 for working on research over the summer and also made around $1,000 at a student job. I received a 1098 T from his university and entering this information is straightforward in Turbo Tax. I can't figure out how or where to enter the information for his nonqualified scholarship. I am claiming him as a dependent and I don't believe he owes any Federal Tax as his income is too low. Thanks for the help!

KrisD15

To clarify,

what do you mean by nonqualified scholarship?

He was issued a 1098-T with Tuition Paid in Box 1 and scholarship received in Box 5.

Was the 6,000 reported on a tax form such as a 1099-MISC or on the 1098-T?

What is reported in Box 1 and in Box 5 of the 1098-T?

Did the student also get a W-2?

If yes, was that for the $1,000?

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Gpa2022Author

To clarify, he received a 1098-T from his University. Box 1 has 57030 and Box 5 has 34509. This makes sense to me, and TT was clear on how to enter this information. He interned for a research center associated with the university over the summer and received $6,000. The Office of Finance and Treasury sent him an email that said he received a "nonqualified scholarship or fellowship payment from the university." and that this may be considered taxable income. It then referenced his paid internship. This email identifying this money is separate from his 1098-T. Since he doesn't owe any Federal taxes as his income is below the threshold, do I need to identify this money on my 1040 and where do I enter this information on TT.

Hal_Al

Employee

Q. Do I need to identify this money on my 1040?

A. No. If it goes anywhere, it goes on your son's tax return. Furthermore, since it is not tax free scholarship, it does not reduce the amount of expenses you can claim for the tuition credit (that statement is academic, as you have more than enough tuition to claim the full credit).

If your are sure, the $6000 isn't already included in box 5, of the 1098-T, then enter it (on the student's return) as described above*. But, as your surmised, he may not need to file at all.

*After entering the 1098-T, on the student's return, you will be asked if there was any scholarship not included in box 5 of the 1098-T. Enter there. Then you will be asked how much of the scholarship was used for room and board. Enter the $6000 there.

Hal_Al

Employee

Q. I don't believe he owes any Federal Tax as his income is too low?

A. If his wages and taxable scholarship are less than $12,950, he is not required to file a tax return (nothing will be taxable). If he needs get any withholding refunded, he can file to do that, even though it's not required.

I, too, am not following what you mean by non qualified scholarship. If the "He was paid $6,000 for working on research" was reported in box 5 of the 1098-T, you have the option of applying it to tuition and other qualified expenses (books, fees, computer) and not declaring it taxable, depending on what works out best.

After entering the 1098-T, on the student's return, you will be asked if there was any scholarship not included in box 5 of the 1098-T. Enter there. Then you will be asked how much of the scholarship was used for room and board. Enter the amount you want/think is taxable there. Note the wording at that screen “or other expenses”. You didn’t have to literally use the scholarship for R&B.