When I go to review my return, I am told to check my entry; my scholarship is included as other income?

Forum|Forum|3 years ago
January 19, 2023
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In 2022 I received $8,500 in scholarships, but my tuition was near $10,000. If I am not wrong, this means my scholarship is tax free. I went ahead and submitted the 1098T form while filling out the return. Once I get to the end, it tells me to 'check this entry', where it shows 'other income' to be $8,500 and that 'the amounts are too large or too small'. First, I am not sure why my scholarship is being included in 'other income', as it is summing my taxable full time work income with that of my scholarship.

TurboTax Deluxe Online

Hal_Al

Employee

One possibility: After entering the 1098-T, you will be asked how much of the scholarship was used for room & board. That amount, if any, will be treated as taxable income.

MichaelG81

Most scholarships are tax free meeting certain conditions, see below, or click this link for further guidance on Topic No. 421 Scholarships, Fellowship Grants, and Other Grants.

Tax-Free

If you receive a scholarship, a fellowship grant, or other grant, all or part of the amounts you receive may be tax-free. Scholarships, fellowship grants, and other grants are tax-free if you meet the following conditions:

You're a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
The amounts you receive are used to pay for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution.

Taxable

You must include in gross income:

Amounts used for incidental expenses, such as room and board, travel, and optional equipment.
Amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant. However, you don't need to include in gross income any amounts you receive for services that are required by the National Health Service Corps Scholarship Program, the Armed Forces Health Professions Scholarship and Financial Assistance Program, or a comprehensive student work-learning-service program (as defined in section 448(e) of the Higher Education Act of 1965) operated by a work college.

Also, this link in our community by TurboTax explains Do Scholarships Count as Taxable Income, and how to maximize educational credits.

@dremejia17

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Hal_Al

Employee

If TurboTax (TT) allocated the entire $10,000 of tuition to the tuition credit (it takes $10,000 of expenses to get the maximum Lifetime Learning Credit [LLC]), it will then treat the $8500 Scholarship as taxable. You can not double dip; claim the tuition for the credit and also claim the tuition makes the scholarship tax free.

Check the Student Information Worksheet. In particular, Line 17, of Part VI, (amount) "Used for Credit"