Starbucks SCAP 1098-T - PA State Taxes

Forum|Forum|1 year ago
February 13, 2025
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I am a Starbucks partner using the benefits through ASU to go back to school. Its specified in the FAQ document provided to us that in Pennsylvania where I live the Starbucks Tuition Assistance is taxable in the full amount through the state. What does this mean for my tax return? Should I put in my 1098-T? Another similar post was answered and specified that it was not needed if nothing was paid out of pocket, but I have to pay for books and supplies out of pocket. Am I eligible for a tax credit if I paid for books? I have talked to both Starbucks and ASU support and neither of them could answer my question due to being in an uncommon situation due to the state I live in. Thanks in advance for the help!

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KrisD15

To clarify, did you get Form 1098-T and if YEs, is the SCAP funds listed in Box 5? Is the amount in Box 1 larger than (or the same as) the amount in Box 5?

Is the benefit reported on any other tax form?

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maybemaeAuthor

I did receive a 1098-T already, the number is the same in both boxes. The main issue is that I have a mix of federal scholarships and scholarships from the school as well as the portion that Starbucks covers and I'm just not sure which parts are taxable and which parts aren't.

Hal_Al

Employee

Scholarships that pay for qualified educational expenses (QEE - tuition, fees, books and other course materials) is tax free. Scholarship amounts that exceed QEE is taxable income, on the student’s tax return. Room & board are not QEE.

If box 5 of the 1098-T exceeds box 1, TurboTax (TT) will treat the difference as taxable income, unless you enter additional QEE at books and other expenses.

After entering the 1098-T, you will be asked if there were any other scholarships not already shown on the 1098-T.

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". There is a tax “loop hole” available to claim an education credit, for the parents of students on scholarship. 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 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.

The IRS actually encourages use of this technique. From the form 1040 instructions: “You may be able to increase an education credit if the student chooses to include all or part of a Pell grant or certain other scholarships or fellowships in income. For more information, see Pub. 970, the instructions for Form 1040 and IRS.gov/EdCredit". PUB 970 even has examples of how to do the “loop hole”.