2 Form 1098-Ts and Scholarship income

Facts: 21-year old student has two 1098-Ts from 2015. First one is from undergraduate, as he finished undergraduate in May 2015. The undergraduate 1098-T shows $4,000 in tuition (box 2) and $11,000 in scholarships (box 5). I understand that this would - in isolation - result in $7,000 of income to the 21-year old. However, the student entered graduate school in the fall of 2015 and has a 1098-T from the grad school with $29,000 in tuition as well as $2,000 in scholarships.

Worksheet 1-1 on page 7 of Pub 970 would seem to suggest that the tuition and scholarships can be combined when considering whether the tuition is in excess of the scholarship funds. If so, then there is no taxable scholarship for 2015.

TurboTax seems to want to show the $7,000 as income and it isn't clear to me whether it is truly income (meaning I don't understand the rules correctly), or whether there is a bug in TurboTax...or whether I have a data entry issue.

Thoughts?

Thanks.

Reply to
adwagner
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1099-Ts are useless. Most are prepared incorrectly. You need to get the actual amounts paid before you do any calculations. Then you need to review Pub. 970 instructions carefully. I suspect the section you are quoting refers to multiple undergraduate institutions and not one undergraduate and one graduate, but it's been a while since I've dealt with education expenses.

Ira Smilovitz

Reply to
ira smilovitz

I have not researched this but the only restriction in tax law that I am aware of relative to your set of facts, is the one that says the grant is tax fee if you spend the money on qualified tuition and related expenses in accordance with the conditions of the grant. It is the last part that could be the killer as many scholarships have restrictions. E.g., Pell Grants. There are two restrictions. One is that they are issued yearly and run from 7/1/n to 6/30/n+1. The second is that they may only be used for undergraduate degrees (there is an exception for certain post-baccalaureate teacher credentials). Any left over Pell money spent on graduate degree tuition would fail the "in accordance" test.

So, as long as the grant money is spent in accordance with the terms of the grant, you should be good to go.

As IRA S said in his reply, 1098-Ts at least through 2015, are worthless. I never use them. I have the student login to their school account to get the real numbers and supplement that with additional information from the client that would include grants that the school may have missed (almost always nil) and qualified expenses incurred away from the school account such as books, supplies and equipment not bought in the school bookstore.

Reply to
Alan

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