When is a tuition scholarship taxable and non-taxable?

Forum|Forum|3 years ago
April 15, 2022
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Scholarships

MAK70

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.

You must include in gross income amounts used for incidental expenses, such as room and board, travel, and optional equipment.

josephttAuthor

My child meets the requirements for a tax-free scholarship for her college education, why does Turbo tax increase his tax payment liability when he enters a 1098T? The 1098T has tuition payment greater than scholarship amount.

NCPERSON1

@josephtt - if you are claiming the student as your dependent (and Box 1 exceeds Box 5), the 1098-T goes on your tax return and not the student's......if Box 1 is greater than Box 5, that difference is what drives the AOC credit on YOUR tax return.