1098T Qustion

[Dave T]

New client comes with daughter's 1098T from local college. She is t/p's dependent and completed her studies May 2021.

Prior preparer had taken AOTC for 4 years so that any 2021 expenses would be on Lifetime learning credit. Here is the question though, her 1098T has nothing in box 1 but $13K in box 5 scholarships.

Seems that there would be no credit obviously but would the $13K then be taxable income to the t/p?  I've tried doing some research on this but seem to be getting conflicting answers.

Thank you.

[Lion EA]

Scholarships in excess of tuition would be compensation. However, you'll need her bursar's statement to see the actual ins and outs. Colleges still report wrong much too often.

[Pacun]

Make sure those 13K in scholarships are not more than 50% of her support and report that income on the dependent's return and call your next client.

[TexTaxToo]

A scholarship received by a child who is a student isn't taken into account in determining whether the child provided more than half of his or her own support.  (See Pub. 501 or code section 152(f)(5))

However, watch out for the kiddie tax.  The $13,000 is considered unearned income for purposes of the kiddie tax, so child's return would need Form 8615 if it is all taxable.

[Pacun]

I would also see 2020 1098T didn't not include scholarships that should have been included.

As Lion correctly pointed out, see if the university report helps you figure it out.

[Dave T]

Thanks for all responses.  We got it figured out by getting more info from the school.

This board, as many will attest is an incredibly valuable resource.

Thanks again