1098-T Overage - Box 5 greater than box 1

Forum|Forum|3 years ago
February 23, 2023
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My daughter's 1098-T is showing box 5 (scholarships or grants) exceeded box 1 (payments received for qualified tuition). Her SSN appears on the document, but my understanding is that I, the parent, should enter the 1098-T on my tax return because I am claiming her as a dependent. Does this mean that I have to pay taxes on the overage? What if I enter in other educational expenses such as room and board, that is not covered under box 1, that is more than the overage. Will I still have to pay taxes on it?

Best answer by DawnC

Yes, you would have to pay taxes on the excess. And yes, you could add other qualified expenses to lower the amount of tax due, but room and board is not a qualified expense. See Qualified Expenses. Expenses that do not count:

Room and board
Insurance
Medical expenses (including student health fees)
Transportation
Similar personal, living, or family expenses

You can also have the student claim the excess scholarship, possibly at a lower rate. Although, that income may be subject to the kiddie tax, but could still be less than your tax, depending on your tax bracket. Try it both ways and see what works out best.

DawnCAnswer

Employee

Room and board
Insurance
Medical expenses (including student health fees)
Transportation
Similar personal, living, or family expenses

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dcalvis

Hello -- I am in the same situation, that is, Box 5 of Form 1098-T exceeds Box 1. I accept that the overage is taxable, and would be happy to pay the tax. Trouble is, TurboTax is telling me that my daughter must declare this income on her own tax return, and she has already filed. Is there some way to tell TurboTax that I want to pay the tax rather than her? Thanks.

dcalvis

And may I please add a related question. Suppose a student receives other scholarship monies during the freshman year, say, that are not needed to meet college expenses this year but will be needed in future years. Say that those monies are disbursed directly to the student, and the student puts that money away in a 529 for future use. Also suppose that at the time the monies are given, it is not clear whether they will ultimately be used for a qualified expense like tuition or a non-qualified expense like room and board. How does the IRS view those monies? In the end we could look back and say that they were -- or were not -- taxable, depending on how they wind up being spent, but we don't know any of that yet. These monies don't appear on any 1098-T or W-2. Should you/how do you report this money in such a case? Again thanks.