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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
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My daughter received a 1098-T for her grants received to ...

Customer Question

My daughter received a 1098-T for her grants received to attend college and we claimed it as income. Is this taxable or if not why was this 1098 issued and furnished to the IRS.
Submitted: 10 years ago.
Category: Tax
Expert:  Lev replied 10 years ago.
The grant is not nessasery taxable. What kind of grant did she received? Is this Pell Grand? Does the grant include tuition only? Do you require to repay the grant?
Customer: replied 10 years ago.
Reply to Lev's Post: She received a Federal pell grant and state Pheaa grant. It was billed as qualified tuition and expenses. They are not repayable.
Expert:  Lev replied 10 years ago.

Part of the scholarship is not taxable income if it used for tuition and fees (required by the school) or fees, books, etc required for cources.

As I know Federal Pell Grant is used for tuition and fees only and not taxable income.

1098-T reports which part was used for tuition (box 1) and these money are not taxable.

see for reference IRS publication 525 page 31 -

These grants are for your daughter? is there her SSN on 1098-T? Did you report it as your or her income?

Customer: replied 10 years ago.
Reply to Lev's Post: It was for our daughter, her SSN is on the 1098T it is reported in Box 2 as $6,125.00 amounts billed for qualified tuition and expenses and box 4 is $3,150.00 Scholarships and Grants it was reported as her income on her tax return. I used Tax Act software to do our taxes this year and it asked for this when going thru the Q & A and then said this had to be reported as income. Now the school she is going to this fall wants to know why there is a descrepancy between her W2 and reported income. They said they did not think it was taxable. Sorry for the confusion.
Expert:  Lev replied 10 years ago.

Do you mean Scholarships and Grants in box 5? -

Seems that these grants are not taxable. This means that from billed amount of $6,125 Scholarships and Grants paid $3,150. You should not report this amount as taxable.

Did you pay the difference? Or took a loan? either way educational credit may be claimed. If you claimed your daughter as a dependent - you may claim the credit.