1098-T Question: Why Is Box 1 ($6,725) Higher Than Box 5 ($3,748) When I Didn't Pay Out Of Pocket For Tuition?

I received financial aid for school and didn't pay anything out of pocket. Got my 1098-T form and entered the info but im confused if I actually need to claim this since I never paid anything myself. The school gave me the form but everything was covered by grants and aid. Anyone know what to do with this? When I was filling out my taxes, I entered my 1098-T information and I'm seeing that Box 1 shows "Payments received for tuition and related expenses" of $6,725. But Box 5 shows "Scholarships/grants" of $3,748. The thing is, I didn't actually pay the $6,725 myself - it was all covered by financial aid, grants and scholarships. I'm confused why Box 1 and Box 5 don't match up though. There's a difference of $2,977 between what the school says was paid for tuition ($6,725) and what they're reporting as scholarships/grants ($3,748). Box 4 for "Adjustments made for a prior year" and Box 6 for "Adjustments to scholarships/grants" are both empty on my form. I'm about 1 hour and 55 minutes into filling out my taxes and I'm stuck on this part. Do I need to report this as income? Do I owe taxes on the difference between Box 1 and Box 5? I thought everything was covered and I wouldn't need to worry about this. I'm really confused about how to handle this on my tax return since I didn't personally pay anything out of pocket for my education.

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17 comments

Anastasia Kozlov

•18d

Hey Jamal! I had a similar situation last year. The difference between Box 1 ($6,725) and Box 5 ($3,748) means you received $2,977 more in aid than what was paid for qualified education expenses. That extra amount is likely taxable income that you'll need to report. The school reports payments made on your behalf (including financial aid) in Box 1, not just what you personally paid. I'd recommend checking if any of your aid went toward non-qualified expenses like room/board or personal expenses. You'll probably need to include that $2,977 difference as income on your return.

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Fatima Al-Hashimi

•4d

Unfortunately there's not really a way to avoid it if the excess aid went to non-qualified expenses. The IRS considers any scholarship/grant money that exceeds qualified education expenses (tuition, fees, required books) as taxable income. However, you might want to double-check your school's billing statements to make sure the amounts on your 1098-T are accurate - sometimes schools make errors. Also, if any of your aid was used for qualified expenses that aren't reflected properly, you might be able to reduce the taxable amount. But yeah, in most cases you'll need to pay taxes on that difference.

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