1098 T Question

[ETax847]

When you have amounts in box 2 and box 5 on at 1098T, should these amounts be netted together? Or do you just consider the amount in box 2 (amounts billed for qualified tuition and related expenses)

[Jack from Ohio]

The amount of expenses avaialable for consideration of Education Tax credits are the amounts paid for tuition and fees in 2012 MINUS any amounts in box 5. There are times when box 2 does not accurately reflect tuition and fees PAID in 2012. The safest method is to use a billing statement from the college to verify dates and amounts of payments.

[RitaB]

And if the kid received more in grants and scholarships than he had in qualified expenses, the excess goes on the kid's Line 7. It's income. It happens a lot, and I don't think IRS is minding the store or they could recover some tax dollars here. Right click the line and pick the option that is NOT linking you to W-2 input.

[Jack from Ohio]

And if the kid received more in grants and scholarships than he had in qualified expenses, the excess goes on the kid's Line 7. It's income. It happens a lot, and I don't think IRS is minding the store or they could recover some tax dollars here. Right click the line and pick the option that is NOT linking you to W-2 input.

I am not certain that is correct, unless the scholarship is specifically designated to be income.

Federal and School grants and scholarships DO NOT get included on line 7 if they are more than the tuition. The moneys can be spent for other college related expenses.

[RitaB]

I don't think what I said contradicts what you said.

[Jack from Ohio]

I don't think what I said contradicts what you said.

Your post would indicate any and all amounts in box 5 that are greater than box 1 or 2 would be added as income.

And if the kid received more in grants and scholarships than he had in qualified expenses, the excess goes on the kid's Line 7. It's income. It happens a lot, and I don't think IRS is minding the store or they could recover some tax dollars here. Right click the line and pick the option that is NOT linking you to W-2 input.

[RitaB]

My post indicated (or at least I meant for it to indicate) that if the scholarships exceeded the qualified expenses (including but not limited to the ones appearing on the 1098-T) the student had income from scholarships. I guess you are thinking that I think all qualified expenses appear on the Form 1098-T. I do not think that. Books, for example, are qualified expenses for the purpose of reducing taxable scholarships, and they do not appear on the 1098-T.

If you look in Pub 970, IRS says things like "qualified expenses for the purpose of blah, blah, blah..." I was trying to talk like them, and apparently not pulling it off in this instance. I know to subtract all qualified expenses, not just the ones appearing on the 1098-T.

All "college related expenses" are not deductible for this purpose. For example, my two kids have college related housing, there's no other reason for it, and it's not deductible.

Here's an excerpt from Pub 970:

Qualified education expenses. For purposes of tax-free scholarships and fellowships, these are expenses for:

• Tuition and fees required to enroll at or attend an eligible educational institution, and

• Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. These items must be required of all students in your course of instruction.

Expenses that do not qualify. Qualified education expenses do not include the cost of:

• Room and board,

• Travel,

• Research,

• Clerical help, or

• Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution.

[Jack from Ohio]

My post indicated (or at least I meant for it to indicate) that if the scholarships exceeded the qualified expenses (including but not limited to the ones appearing on the 1098-T) the student had income from scholarships. I guess you are thinking that I think all qualified expenses appear on the Form 1098-T. I do not think that. Books, for example, are qualified expenses for the purpose of reducing taxable scholarships, and they do not appear on the 1098-T.

If you look in Pub 970, IRS says things like "qualified expenses for the purpose of blah, blah, blah..." I was trying to talk like them, and apparently not pulling it off in this instance. I know to subtract all qualified expenses, not just the ones appearing on the 1098-T.

All "college related expenses" are not deductible for this purpose. For example, my two kids have college related housing, there's no other reason for it, and it's not deductible.

Here's an excerpt from Pub 970:

Qualified education expenses. For purposes of tax-free scholarships and fellowships, these are expenses for:

• Tuition and fees required to enroll at or attend an eligible educational institution, and

• Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. These items must be required of all students in your course of instruction.

Expenses that do not qualify. Qualified education expenses do not include the cost of:

• Room and board,

• Travel,

• Research,

• Clerical help, or

• Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution.

Eligibility for college tax credit and whether a scholarship is considered income are two entirely different points. Show me where it states that scholarships and grants in excess of tuition and fees must be counted as income to the student?

I have 3 children. Now 28, 26 & 25. From 2002 thru 2010 I had children in college. Two years, two in at the same time. If son (middle child) had gone more than two years, in 2006 all three would have been in college at the same time. The financial aid department at the college where both girls attended know me by voice recognition.

[RitaB]

Eligibility for college tax credit and whether a scholarship is considered income are two entirely different points. Show me where it states that scholarships and grants in excess of tuition and fees must be counted as income to the student?

I have 3 children. Now 28, 26 & 25. From 2002 thru 2010 I had children in college. Two years, two in at the same time. If son (middle child) had gone more than two years, in 2006 all three would have been in college at the same time. The financial aid department at the college where both girls attended know me by voice recognition.

Did you see this line up there in my post: "Qualified education expenses. For purposes of tax-free scholarships and fellowships, these are expenses for..." ?

http://www.irs.gov/publications/p970/ch01.html

http://www.ehow.com/way_5858919_do-pell-grant-money-taxes_.html

http://www.collegeloanconsultant.com/if-my-pell-grant-exceeded-my-tuition-am-i-taxed-on-what-is-left.html

http://www.irs.gov/taxtopics/tc421.html

http://www.freetaxcourse.org/Other_Line_7_Income_on_1040.html

I also have three kids, ain't it great?! But you are older than me, apparently. Bahahahaha, just kidding. The two in college get merit scholarships, they don't exceed qualified expenses, and my daughter gets a meal ticket and books as a member of the track team. The financial aid office doesn't know me from Adam, but they don't know beans about taxes, so I don't really have time to be talking to them anyway.