1098 t

[Florida_EA]

Client gets a 1098 T showing 3,000 in Box 1 and 7,000 in Scholarships in Box 3. Can he take the 3,000 as a deduction/credit for the AOTC? The scholarship was used to pay fees and tuition

[Lion]

What does the bursar's statement say?

[Florida_EA]

The $3,000 reported in Box 1 was paid for tuition and fees. In addition to the $3,000 other tuition and fee expenses were paid by the scholarship reported in 7,000. Hence my review of the rules show that $3,000 can be used for the AOTC and the scholarship is tax free.

[kamckinley]

You can't double dip. Qualified expenses that were used for the tax-free scholarship can't also be used for the education credits. From the 1098-T this looks like a taxable scholarship. You need to get the tuition statement to confirm that the scholarship is really tax-free and if there were additional expenses above and beyond the scholarship that would qualify for AOTC.

[Florida_EA]

I am not double dipping. The tax free scholarship remains non taxable and the 3,000 paid is what I am taking into account for calculation of the AOTC. Just needed to confirm that this is correct.

[Lion]

If his tuition paid was $3,000 and his scholarship was $7,000, then $3,000 of the scholarship paid his tuition and can be tax free with $4,000 of the scholarship taxable. That's why I told you to use the bursar's statement, to discover what really happened. Forms 1098-T have been inaccurate for years and often still are inaccurate even though they are supposed to report what was paid from all sources in box 1. How much did the parents/student actually pay, for instance? That's not on 1098-T. Get the bursar's statement and ask your clients questions.

[Anarchrist]

Assuming total tuition was $10k with $7k paid by scholarships and $3k paid by the student, then yes, he can take $3k towards the tuition credits.

I had one where the 1098 listed $44k of payments received in box 1 and $12k of scholarships in box 5. The tuition statement from the school listed $56K of tuition, $12k of scholarships, and $44k of payments from the student. The software erroneously netted the scholarships against the payments in box 1. I left it since the amounts are so much over the threshold, but if they weren't over the threshold, I'd have to override the software.

[Clemrick]

Let's try once more:
All allowable education expenses, as generally shown in Box 1 of the Form 1098-T, must first be reduced by the amount of any scholarship shown in Box 5 of the Form 1098-T.
The mere fact that the scholarship itself was not taxable changes nothing. The student was still "reimbursed" for certain expenses, and thus those reimbursed expenses cannot be considered for any education credits.
What you (apparently) are trying to do is analogous to deducting medical expenses that were actually paid by insurance.
Most professional tax software has very good "education worksheets" that, when completed, explain things quite well.

Our local university only put money actually paid by student or parents to the university in Box 1. The 1098-Ts they issued often had scholarship amounts larger than what was listed in Box 1, so we have required clients to print out their accounts for the year to see what the tuition, fees, and books actually cost. I think that is what the OP is running into here.

[Burke]

Agreed. Still can't trust the 1098's. Get a transcript.

[Florida_EA]

After getting the detail statement from the University, it revealed that the scholarship of $7,000 was used to pay room and board and tuition. $4,000 was used towards tuition and $3,000 was used towards room and board. So the $3,000 would be taxable to the son, correct?

[TaxGuyBill]

Yes.

However, *IF* they would otherwise qualify for the American Opportunity Credit AND *IF* the scholarships allow it to be used for non-tuition, the son could claim $7000 of taxable scholarship, and that would give Dad $4000 of paid tuition to use for the American Opportunity Credit. If the son has other income and is paying high-rate Kiddie Tax, it MIGHT be better for the kid to only claim $5000, and give Dad $2000 for the American Opportunity Credit.