Question on whether 18 year old student needs to file

Forum|Forum|3 years ago
April 19, 2022
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Hi... my son received a 1098-T that shows $800 more in scholarships and grants (box 5) than the amount for payments made (box 1). TurboTax says he'll need to file his own return, but everything I've read says that's not the case because it's not greater than $1100 in income (IRS Publication 929). Am I correct, or does he need to file? (Yes, I should have asked this question at least a week ago!)

Thank you!

Best answer by DanaB27

Yes, if he doesn't have any other income then he doesn't have to file.

Please see Do I need to file my own taxes if I'm a dependent? for additional information.

DanaB27Answer

Yes, if he doesn't have any other income then he doesn't have to file.

Please see Do I need to file my own taxes if I'm a dependent? for additional information.

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Hal_Al

Employee

Your dependent child must file a tax return for 2021 if he had any of the following:

Total income (wages, salaries, taxable scholarship etc.) of more than $12,550* (2021).
Unearned income (interest, dividends, capital gains, unemployment, taxable portion of 529 distribution) of more than $1100.
Unearned income over $350 and gross income of more than $1100
Household employee income (e.g. baby sitting, lawn mowing) over $2300 ($12,550 if under age 18)
Other self employment income over $432, including money on a form 1099-NEC

Even if he had less, he is allowed to file if he needs to get back income tax withholding. He cannot get back social security or Medicare tax withholding.

In TurboTax, he indicates that somebody else can claim him as a dependent, at the personal information section.

*Scholarship income is treated as earned for purposes of the standard deduction, so the filing threshold is $12,550, rather then the $1100 for unearned income

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