MargaretMort Posted April 1, 2011 Report Share Posted April 1, 2011 Client has child attending college. The 1098-T shows payment received of $1770.58 and Scholarships or grants of $2388. Even adding in Books, etc., the costs don't equal the scholarship. Does that mean they have $400 or so taxable income instead of the $134 credit they think they have? As always, thanks for all your help. MM Quote Link to comment Share on other sites More sharing options...
Catherine Posted April 1, 2011 Report Share Posted April 1, 2011 Client has child attending college. The 1098-T shows payment received of $1770.58 and Scholarships or grants of $2388. Even adding in Books, etc., the costs don't equal the scholarship. Does that mean they have $400 or so taxable income instead of the $134 credit they think they have? As always, thanks for all your help. MM 1098-T's frequently nothing but garbage info -- they miss payments made, they "net" amounts out instead of reporting in full (but only inconsistently), they mis-apply which year (school year versus calendar year), and then they can get just plain weird from there. Get from the client a list of what they paid and any letters about scholarships - sometimes the bursar's office can give a statement of account that is close to reality (but won't include books). Add 'em up yourself. Chances are good that your client paid at least the amount shown out-of-pocket, and that the scholarship/grant amount was applied outside what your clients paid. Catherine Quote Link to comment Share on other sites More sharing options...
Hahn1040 Posted April 1, 2011 Report Share Posted April 1, 2011 Often scholarships will cover more than qualified tuition and fees. Room and board are not qualified education expenses for determining tax-free scholarships. IF the scholarship is greater than the tuition and fees, then the excess is added to THE STUDENT's income (line 7). In many cases the student had a part-time job and made well under the standard deduction, so adding some to line 7 does not cause the student to owe. I did have a case a couple of years ago where a young woman had a FULL scholarship to Columbia. She had a summer job that was already greater than her standard deduction, So she did end up paying some tax- The mother was quite put out that the child owed tax. My thought was, "Goodness- she is going to Columbia on a free ride! SO you pay a couple hundred dollars of tax!" I'm sure she worked very hard and is very deserving- but still free is free! Pub 970 has a very good chart which shows what expenses qualifies as tax free. Quote Link to comment Share on other sites More sharing options...
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