1098T - Scholarship - Taxable vs. Non Taxablw

[Saravia]

 

Hello Everyone, 

I am needing some assistant in the followings:

Taxpayer is 21, - Full time student, and is not a dependent.

He worked earned income $5K, and unemployment $16K. 

1098T - Box 1 - 20,505 and Box 5 - 23,050

I entered the information as it appears on 1098T, and the system is bringing the full $23,050 as taxable. 

He received FAFSA and CAL GRANTS, all funds were used to pay tuition, books and materials to use for school. 

I am under the impression only a small portion will be taxable and there rest nontaxable, but the full $23050 are being added to 1040 Line 1 under other non w2 wages.

 

Looking at the 10 EdExp - Scholarship Worksheet - 7a. Tax Free part, this amount is the most you can exclude from your income.  $20,505. 

What do I need to do to fix the taxable income on ATX?

Thanks, Pat

 

 

[Lion EA]

Have the student get you the bursar's statement to use, not Form 1098-T.

[Hahn1040]

did you check the box that he is a candidate for a degree?  If he is not, it is all taxable

[Saravia]

No, he does not have a degree yet, this is his 3 year will be graduating next year.

 

[Hahn1040]

there is a box to check to indicate that he is a candidate for a degree.

On the Input screen of the 1040EdExp.  it is  below the section that resembles the 1098T,  It is just above where you check that the student received a 1098T

[Saravia]

Box9 - does not have a check mark. Would the 23,050 be consider taxable income?

[Saravia]

Sorry I checked the box "Candidate for a degree" and now his taxable income from the scholarship is only $2545 ( 23050 - 20505) which seems to be correct. And this change seems to disqualify tax payer from the American Opportunity Credit.

Does this sound correct?

Thanks for all the help. Pat

[Pacun]

Make another $4K taxable and the student will qualify for AOC.

[Saravia]

Just for testing, I added an addition 5K to the w2, but AOC still shows 0.

 

Any thoughts?

 

Thanks, Pat

[Pacun]

You have to answer the question to show that the scholarship was less and that your client was not convicted of drugs.... all answer other questions.