Why is scholarship taxable.

Forum|Forum|11 months ago
April 6, 2025
3 replies
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Scholarship is calculating as taxable,

.1098 T qualified expenses. $35134 box1

Scholarship. $29000 box 5

Box 8 checked (at least 1/2 time student)

Box 9 checked (graduate student)

Tax return is calculating $29000 scholarship fully taxed

anyone know why?

KrisD15

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Look to see how the program is handling the Education section, it may be allocating expenses to the Lifetime Learning Credit instead of the scholarship.

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NCPERSON1

@Goldenreturn it is not taxable; personally, I wouldn't even enter the 1098-T. it is for informational purposes only.

Hal_Al

Employee

Q. Tax return is calculating $29000 scholarship fully taxed?

A. That is unusual and there is no known glitch in TurboTax (TT). I suggest you delete the student (and 1098-T) and re-enter.*

You should expect to see one of two things.

1. TT treats $3866 of the scholarship as taxable, so that you can allocate $10,000 of tuition to get the maximum Lifetime Learning Credit (LLC).**

2. TT does not give you the full LLC because you only have $6134 of net tuition.

Books and a computer are qualified expenses for tax free scholarship but not the LLC.

*Or, be on the look out for a screen called "Amount used to calculate education credit" (or similar wording). It sounds like TT may have entered the full $35134 (also unusual). You are allowed to change it at that screen (to $10,000, 6134, or 0).

**Grad students are generally not eligible for the more generous American Opportunity Credit, except in the year they receive their BS/BA.