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1098T - Scholarship - Taxable vs. Non Taxablw


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Hello Everyone, 

I am needing some assistant in the followings:

Taxpayer is 21, - Full time student, and is not a dependent.

He worked earned income $5K, and unemployment $16K. 

1098T - Box 1 - 20,505 and Box 5 - 23,050

I entered the information as it appears on 1098T, and the system is bringing the full $23,050 as taxable. 

He received FAFSA and CAL GRANTS, all funds were used to pay tuition, books and materials to use for school. 

I am under the impression only a small portion will be taxable and there rest nontaxable, but the full $23050 are being added to 1040 Line 1 under other non w2 wages.

 

Looking at the 10 EdExp - Scholarship Worksheet - 7a. Tax Free part, this amount is the most you can exclude from your income.  $20,505. 

What do I need to do to fix the taxable income on ATX?

Thanks, Pat

 

 

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there is a box to check to indicate that he is a candidate for a degree.

On the Input screen of the 1040EdExp.  it is  below the section that resembles the 1098T,  It is just above where you check that the student received a 1098T

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Sorry I checked the box "Candidate for a degree" and now his taxable income from the scholarship is only $2545 ( 23050 - 20505) which seems to be correct. And this change seems to disqualify tax payer from the American Opportunity Credit.

Does this sound correct?

Thanks for all the help. Pat

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