1098-T one more time for clarification

[Peachie]

I have read so much about the 1098-T form, including what's written here, yet I still seem confused by it. Will someone here just humor me and set me straight by answering the following question:

I have a student with a 1098-T with $4235 in box 2; $2130 in box 5. I am told that the scholarships and grants amounts were used for tuition. For purposes of the education credits am I to use $4235 or $2105 for educational expenses? When I look at the printout from the student's fees paid-the grants are Pell Grants and the loans are Staffords. What am I missing?

Page 12-6 of Ttb says I can use all of box 2 amount, but the top of the page under Coordination of... seems to say otherwise. I am so confused. I thought if the scholarship money was used for Tuition and fees, it was not subtracted from the box 2 amount. Please HELP!!

Thanks.

Peachie

[AccTaxMan]

I hate dealing with Form 1098-T too. More often than not they thought I was crazy when I told them that the scholarship and grant (after tuition and book costs) is taxable. Then 9 out of 10 will tell me their fellow schoolmates never 'bother with it' and they were not caught. What are you going to say?

[AJsTax]

1098-t

The amount in box 2 is the amount billed for fees and tuition for the past year and sometimes for the first 3 months of current year. This is usually the same as paid for fees and tuition, but not always if the first part of the new year was not PAID before the end of the year.

If the amount in box 5 is used to pay fees and tuition you must reduce box 2 by that amount before figuring the credit. You can not take a credit on free money.

If the scholarship money is used for LIVING expenses then it should be taxable. That does not often happen because the loans and out of pocket money usually cover that.

[Peachie]

I hate dealing with Form 1098-T too. More often than not they thought I was crazy when I told them that the scholarship and grant (after tuition and book costs) is taxable. Then 9 out of 10 will tell me their fellow schoolmates never 'bother with it' and they were not caught. What are you going to say?

I don't know about what I am going to say, I just need to know what I am going to do. Normally, if they tell me it's for tuition and fees, I have ignored box 5. Now, I am not so sure. Funny thing is, I
am not sure I have ever seen a definitive answer. IRS has never notified a client that they have taken the wrong amount for education credits. Doesn't mean that I want to continue to do it incorrectly if I am.

Peachie

[Peachie]

The amount in box 2 is the amount billed for fees and tuition for the past year and sometimes for the first 3 months of current year. This is usually the same as paid for fees and tuition, but not always if the first part of the new year was not PAID before the end of the year.

If the amount in box 5 is used to pay fees and tuition you must reduce box 2 by that amount before figuring the credit. You can not take a credit on free money.

Thank you so much for you response. This makes absolute sense when you explain it this way. I am off to do a correctly prepared 8863.

Happy Taxing.

Peachie

[AJsTax]

Box 5

You can't just ignore the amount in box 2.
Quite often when you deduct the amount in box 5 from box 2, the amount left that is eligible for education credits is much higher than the amount needed for the credit. That will change with each situation.
If box 5 is larger than box 2 you cannot take credits based on the 1098-T. They were covered by the scholarships and grants.
Don't confuse the loans in this. Loans are considered the same as out of pocket money in the year disbursed and used to pay for school.

[AccTaxMan]

If the scholarship money is used for LIVING expenses then it should be taxable. That does not often happen because the loans and out of pocket money usually cover that.

I think the rule says scholarship is taxable if it is not used for tuition or books cost. So if the amount in box 5 is greater than the amount in box 2, I think the difference (after you deduct the books cost) is taxable no matter how you use it. Is the way I see it the same as yours or is it different?

[AJsTax]

The same

I think the rule says scholarship is taxable if it is not used for tuition or books cost. So if the amount in box 5 is greater than the amount in box 2, I think the difference (after you deduct the books cost) is taxable no matter how you use it. Is the way I see it the same as yours or is it different?

The same. If you take off fees, tuition, books from total cost of school, what is left is usually room and board , which is living expenses.

[BOB W]

Here's what I do, right or wrong. I deduct box 5 from either box 1 or 2 and use that as eligible tuition. I have never seen box 5 greater than box 1 or 2 but if it does I believe the excess would be taxable income....???

[Burke]

Here is what I do. I don't pay any attention to what is on that form in any of the boxes. I ask for a complete print-out of all tuition, fees, expenses billed, and what is paid either by loan, cash, credit, grant or scholarship. And you will generally find that what is on that form is incorrect (or at the very least, insufficient to determine the correct amt to deduct.)

[AJsTax]

Not often

Here's what I do, right or wrong. I deduct box 5 from either box 1 or 2 and use that as eligible tuition. I have never seen box 5 greater than box 1 or 2 but if it does I believe the excess would be taxable income....???

Not often is the difference taxable, unless it would be a large number. The books and necessary fees that are not included in fees and tuition are included for scholarships and grants. I had two this week that were larger box 5 than box 2. when we called and asked for the book expense , that wiped out the difference.
I agree the absolute right way is to get all the numbers from the invoices, statements, etc. and figure the allowable expenses that way. I do if the client can supply that much info. Does not happen often so we go with the 1098-T most of the time. I probably did 10or 15 returns in the last week with education credits.

[Burke]

I find the printouts are very easy to obtain. Usually the student and/or parent can download from school's website. They are all wired these days, and all they have to do is go into the student's account. They download and email it to me. Even if school is in another state/city.

[taxmom34]

years ago when this education credit was instituted, the instructions in class were that if there is a scholarship that is the money first applied to tuition, anything after that is other expenses. and i've kept that in mind each time i get a 1098T with scholarships

[Peachie]

Hi all.

It seems the best thing for me to do is to actually use the figures from the printout that the mother e-mailed me and go from there. The breakdown shows all of the fees, tuition, loan amounts and any additional monies paid by the taxpayer.

Box 5 is not larger than box 2.

Thanks very much for your learned responses. It does show that the details are in the interpretations.
I think I got it now.

Peachie