2, 1098-ts. One, a scholarship (let's say 40K) is netting against the smaller summer tuition (say $3K) and as a result no educations credits. Does this seem right?

[Samantha]

I was wondering if anyone else has run into this. My client has 2, 1098-ts. One was a full scholarship amount. Then the dependent went to school at another college during the summer to prep for grad school. So the large scholarship (let's say 40K) is netting against the smaller summer tuition (say $3K) and as a result, even with book expenses, no educations credits due to "zero" qualifying expenses. Mathematically it makes sense, but it doesn't feel right.

If the scholarship was for one school and not both, how can we not get a credit on the smaller 1098T?

Thank you!

[Just-Lisa-Now-]

Kind of like having 2 Schedule Cs and having profit on one, but a loss on the other, you cant get the EIC on the one with the profit, they cancel each other out?

[Samantha]

I know. I really struggled with it. It makes sense, but then I started thinking do I need to reconcile how the scholarship was "used?" You know how some 1098ts will show the scholarship but also list an amount pay (which may also include cash above the scholarship amount). Given the amount of educations credits I work on, I was actually surprised this hasn't happened before. And I am just not seeing exactly this example out there. So I might be over thinking it (like the schedule C example you used) or I might be missing something important - such as the tuition the scholarship actually paid? Thanks for your thoughts!

[rbynaker]

1098-Ts are notoriously incorrect.  It's even worse this year now that they're not allowed to just sweep everything under the box 2 rug.  Have the client get a financial transcript from the school.

[Samantha]

Thank you for your suggestion! I have asked the client to get just that. And you are right, this 1098t is different from all the prior years on this same college. Thanks again!

[dd4vols]

@rbynaker  I have run across this also.  The 1098-T for one of my client's kids only has tuition for fall 2018 in box  1, but the scholarships for Spring 18 and Fall 18 in box 5.  And I had her get transcripts with dates, and she did pay all in 2018. I know i will never get the university to send a corrected one (they've already sent one corrected because they only had 1/2 of the Fall tuition on the first one)……..so, if I have the correct $ tuition payments, I intend to use it, but just wondering if this will cause a 'matching' problem with the IRS when they start that process.

[Samantha]

At least you have the leg work done if you get the AUR letter. I know what you mean though. Trying to get the university help is a huge roadblock!

[TaxGuyBill · Accepted solution]

Yes, you can get an educational credit (assuming all other requirements are met).

If the scholarships are larger than the tuition, that means the scholarships are allowed to be spent on non-tuition items.

One Line 7 of the Student Info Worksheet (see picture) enter a number that is $4000 less than the TOTAL amount of tuition (from both colleges).

That will allow $4000 of tuition to be used for educational credits on the parents' return (I used $4000 assuming you were going to use the American Opportunity Credit).

The amount of scholarships not used for tuition (Line 9 on that worksheet) is taxable on the student's tax return.  If the student's total income on his tax return is over $12,000, then Kiddie Tax may apply (depending on the numbers, that might mean it may be better to only allocate $2000 to the American Opportunity Credit).

[Samantha]

I am not sure if there is a way to direct this question to TaxGuyBill, but when I tried this solution it didn't quite hit my problem. Your solution works when the 1098-T with the scholarship has something in box 1, but in my case the scholarship 1098-T has nothing in box one (despite it all going to tuition - they changed their reporting method this year). My other 1098-T has only the amount in box 1 - and is a small amount of tuition at a different school. Thank you!

[TaxGuyBill]

It sounds like the 1098-T is REALLY wrong.

Enter zero in Box 1, and then scroll down to near the bottom of the 1098-T worksheet and enter the actual amount of tuition paid in Line B of the Box 1 reconciliation.

[Samantha]

Thank you. Yes, it has been really a challenge to work with.

[Cathy S]

Where on the student's return do you enter the taxable amount??