Turbotax is taxing 1098-T box 5 scholarship

Forum|Forum|5 years ago
July 12, 2020
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Hi - I am filing my son's taxes and found that Turbotax is taxing the scholarship amount in 1098-T box 5.

Here are some sample numbers

- Box 1 = $20k

- Box 5 = $5k

- 529 plan paid $20k to the school

The Student Information Worksheet section VIII line 4 shows the $5k as excess distributions and calculates line 8 earnings taxable to recipient which ends up on 1040 line 7a.

According to https://www.irs.gov/pub/irs-pdf/p970.pdf Scholarship is tax free.

Should I zero box 5 on the 1098-T to work around this problem?

thx!

macuser_22

Employee

Scholarships in excess of tuition are taxable income to the student that had the scholarship. That should be on line 1 of the students tax return with SCH next to it. Scholarship are the students income and not the parents.

If the 20K 529 paid the institution then the scholarship would be a taxable excess.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

rpellegrAuthor

thanks for the quick response... sorry, i need to correct my example numbers as follows:

- Box 1 = $20k

- Box 5 = $5k

- 529 plan paid $15k to the school

I see the scholarship as a discount to the tuition and not a taxable amount. Is that correct? is Turbotax calculating incorrectly?

macuser_22

Employee

Whose tax return are you asking about? Scholarships are not reported on the parents tax return. They are reported on the students ta return of the student is required to file a tax return.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**