1098-T

[Max W]

Client rec'd a 1098-T with Box 1, Tuition $13000 and Box 5, Scholarships/Grants $11000.   However, the entire tuition was covered by grants or scholarships.    One of the scholarships was from Starbucks, of which $5200 was tax exempt.

At first glance of the 1098-T, my first thought was an AOC, but with nothing out of pocket by the client, it doesn't seem to be the right thing.

Comments please.

TIA

 

[Lion EA]

Does he have $3,200 in taxable scholarships? Or, are any of the scholarships usable against room & board? Or does he have any required books/equipment/etc.?

Would it be to the family's advantage to use any scholarships available for R&B to free up $4,000 of tuition for AOC?

Did he report the Starbucks scholarship to financial aid?

[jasdlm]

Can you add $4,000 to taxable income (Schedule 1) of student return and then take AOC?  

[Lion EA]

Does he have a Form 1099-Q also?

[Max W]

On 3/25/2025 at 12:23 PM, Lion EA said:

Does he have $3,200 in taxable scholarships? Or, are any of the scholarships usable against room & board? Or does he have any required books/equipment/etc.?

Would it be to the family's advantage to use any scholarships available for R&B to free up $4,000 of tuition for AOC?

Did he report the Starbucks scholarship to financial aid?

Yes,there was more than $3200 in taxable scholarships and tax was withheld on the Starbucks paychecks.  

Not sure about the R&B.  The schools financial aid?

On 3/25/2025 at 12:24 PM, jasdlm said:

Can you add $4,000 to taxable income (Schedule 1) of student return and then take AOC?  

The taxable income is more like $11,000

On 3/25/2025 at 12:37 PM, Lion EA said:

Does he have a Form 1099-Q also?

No.

[Sara EA]

The $5200 was most likely a tuition assistance employee benefit from Starbucks, not a scholarship. It can be used for more than tuition https://www.irs.gov/newsroom/employer-offered-educational-assistance-programs-can-help-pay-for-college  That said, Pub 970, figure 2.1, makes clear that the same expenses covered by the employer-provided tuition assistance can't be used for the education credits. Seems like you have a taxable scholarship of $3200 - expenses for books, equipment, etc.

Note that the choice to include a scholarship in income isn't that simple.  The terms of the scholarship must specify that it may be used for nonqualified expenses like room and board.  Most scholarships specify that they are for tuition only.  I once researched whether a particular scholarship allowed nonqualified education expenses and that info just isn't out there.