Rules about submitting 1098-T and being a dependent

Forum|Forum|6 years ago
February 8, 2020
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Hi all, this is my first time filing taxes so I am rather confused. In terms of actual income, I made $800 from a part time job last semester (didn't have any withheld so maybe I have to pay some taxes on that).

However, when my university gave me my 1098-T, my box 5 for scholarships was much higher than my box 1 for tuition paid. It recently came to my attention that this extra amount is considered taxable income (no one had bothered to tell me that before - 2019 was my first full year as a student so luckily it didn't affect anything for 2018). This is accurate, since my scholarship also covers my room and board and other expenses beyond just tuition.

The issue is that on TurboTax, I can enter all my 1098-T info and it shows that I owe a few hundred in taxes. I am fine paying that if I must. Also, I have two options: I can say that I am *eligible* to be claimed as a dependent but will not be claimed, and this gives me a lower amount owed than if I say I *will be* claimed - so should I then tell my parents they shouldn't claim me as a dependent?

The rules are just really confusing to me, and my parents don't know what to do either. Help would be appreciated!

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JotikaT2

It depends.

If you are being claimed as a dependent on your parent's return, they will be the ones who report the 1098-T information.

This may be more practical as you may not even have a filing requirement. Please see the attached to determine if you need to file a return.

Gross income amount for dependents

You are correct that scholarships can be taxable if they are used for the following items:

Room & board
Travel & incidental expenses
Any fees, books & supplies not required for classes

Scholarships are not taxable if used at an eligible school for a degree if:

Tuition & fees
Fees, books, supplies needed for classes
Scholarship or fellowship for services from:
National Health Services Corps Scholarship Program
Armed Forces Health Professions Scholarship & Financial Assistance program

If after reviewing your total income above, you determine you do not have to file a return, you should have your parents claim you as a dependent and tax the education credits on their return.

They should input the 1098-T information as follows:

Go to the Federal section of the program.
Select "Deductions & Credits"
Select "Expenses and Scholarships (Form 1098-T)" and click start

Here is a handy chart that compares the education credits and each of the requirements.

Chart comparing credits

Tuition & fees deduction

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maniiAuthor

Thanks for the prompt response. I will need to file my own taxes as the difference in box 5 and box 1 on 1098-T is over $12,200. I don't think I qualify for any of those deductions as my scholarship covers all tuition and fees costs.

I should have included this in the original question, but I have also heard that I need to file Form 8615 (tax for child with unearned income) - this confuses me since I thought the taxable scholarship was considered earned income. Does turbotax automatically figure this form for me? Because right now I think I have all of the numbers correct, though nowhere did I explictly fill out the 8615. I just told turbotax that my parents were alive and I earned a certain amount.

KrisD15

If you need to file form 8615, TurboTax will generate it for you, but scholarships are not unearned income.

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KrisD15

NORMALLY FOR DEPENDENT STUDENTS- Parents (or whoever claim you) gets the credit if there is one and the student claims the taxable income if there is any.

It is confusing and one of the reasons it is, is that this is one of the few areas where you have options of how you want to report the tax information. The IRS allows you to (legally) manipulate the education expenses and scholarships to get the best tax break.

Yes, you, as the student, need to claim as taxable income the excess amount of scholarship funds received in the tax year that is over the education expenses that were paid in the same year.

Yes, if claiming you on their taxes has no benefit, you can select "No" to the second question. You are still filing as a dependent, but you may get the non-refundable portion of the credit on your return. This is tricky and you should understand what you're doing.

ALSO BE AWARE that you might be able to claim MORE income if that allows a better credit for your parents.

When you enter your W2 and the 1098-T, TurboTax will do the math and tell you what you owe. You might want to use the 1098-T on your parents return, then on yours to see which way is better, but you can only file it one way.

I suggest you look at Pub 970 page 16 to see the examples used by the IRS as to the options you have.

@manii

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