Is my 1098t enough to report taxable scholarships?

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bethyb
bethyb Member Posts: 2 Level 2

Hello all, I will be coming up on my third year of filing taxes, and I have a concern regarding my scholarships. I receive and enter a 1098t form whenever I do taxes, and Box 5 is always greater than Box 1 because I receive refunds. I recently discovered that excess scholarships are usually taxable, and some websites mention having to enter that excess amount in a box on the 1040 form. If I am entering my 1098t into FreeTaxUSA, is the program automatically calculating the taxable income for me? I just want to make sure I am reporting it correctly, and I also don't want to risk reporting the income twice for further penalties. I also don't want to unnecessarily amend my previous returns if it has been sorting itself out automatically. Thank you!

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  • Henry
    Henry FreeTaxUSA Agent Posts: 86
    edited November 2023 Answer ✓
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    Hi bethyb! Thanks for asking about this. IRS Publication 970 explains that a scholarship or grant is tax free only to the extent that it doesn't exceed your qualified education expenses. Qualified education expenses include tuition and fees required to enroll at the school, as well as course-related expenses, such as books, supplies, and equipment that are required for your courses.

    (see the bottom of pg 5, https://www.irs.gov/pub/irs-pdf/p970.pdf)

    Any portion of your scholarship or grant that is used for other expenses, such as room and board, is taxable and needs to be reported on the Other Sources of Income screen. You can get there by selecting Income > Uncommon Income > Other Income from the menu bar. On that screen, you are asked if you received a scholarship or grant that was not used to pay for tuition, books, or other qualified education expenses.

    If you missed reporting taxable scholarship income on any prior year returns, those can be amended. To do that, go to our homepage, select Prior Year, and choose the year that you need to amend. Then login with your username and password. Once you are signed in to the appropriate year, click on the 'Amend Tax Return' link provided on the right-hand sidebar.

  • bethyb
    bethyb Member Posts: 2 Level 2
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    Okay, thank you!