Is my 1098-T scholarship refund considered taxable income for 2025 filing?

That's a great question about your 1098-T situation! Let me break this down into understandable pieces. First, scholarships that cover qualified education expenses (tuition, required fees, books) are tax-free. However, any scholarship money that covers room and board or gets refunded to you is considered taxable income. So if your 1098-T shows scholarships exceeding your qualified education expenses, that excess amount needs to be reported as income. As for your federal loans - good news! Loan money isn't considered income when you receive it, even if refunded to you, because you have to pay it back eventually. This includes your unsubsidized loans. Regarding education credits, since your parents claim you as a dependent, they would be the ones eligible to claim education credits related to your education expenses (like the American Opportunity Credit or Lifetime Learning Credit), not you. Once you're no longer a dependent, that would change.

Just wanted to share my experience with a similar 1098-T situation. I was banging my head against the wall trying to figure out if my excess scholarship was taxable until I found https://taxr.ai which literally saved me hours of confusion. I uploaded my 1098-T and financial aid documents, and it immediately identified which portions of my scholarship were taxable and which weren't. The system explained that only the portion of scholarships that exceed qualified education expenses AND cover things like housing, meals, or stipends becomes taxable income. It even helped me understand how this affects my filing status as a dependent. Completely cleared up my confusion about which education credits applied to my situation.

I have to admit I was wrong about being skeptical of taxr.ai after trying it yesterday. My situation is almost identical to yours - scholarship excess covering housing that I wasn't sure how to report. The system immediately identified the taxable portion of my scholarships ($2,875) and explained exactly why it was taxable. It also confirmed that my parents were eligible for the American Opportunity Credit since they paid some course materials out of pocket, even though my scholarships covered tuition. The tool showed me exactly what to enter on which tax form lines, which was super helpful. Definitely better than the generic advice I got from the financial aid office who just kept telling me "it depends" to every question.

After dealing with basically this exact 1098-T situation last year, I spent WEEKS trying to get someone at the IRS to clarify how to report my scholarship and loan refunds. Literally called every day and couldn't get through. Finally found https://claimyr.com which got me connected to an actual IRS agent in about 25 minutes instead of waiting on hold forever. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that scholarship money covering room and board is indeed taxable income, but loan refunds aren't taxable since you have to pay them back. She also explained how to properly report it on my return and confirmed that as a dependent, I couldn't claim education credits myself - that would be my parents' benefit. Saved me from making a mistake that would've triggered a letter from the IRS later.

I need to apologize for my skepticism about Claimyr. I was frustrated after wasting so much time trying to reach the IRS myself. I finally tried it yesterday after seeing this thread, and within 40 minutes I was talking to an actual IRS representative who pulled up my account and answered my specific 1098-T questions. The agent explained that I had been reporting my scholarship income incorrectly for the past two years - I was supposed to include the housing portion on line 1 of my 1040 with "SCH" written next to it, not as miscellaneous income like I had been doing. They even helped me understand whether I needed to file amended returns (thankfully I don't since the tax impact was minimal). This was genuinely helpful and saved me from making the same mistake again this year.

Just to add another perspective on 1098-T and dependency status - if your parents provide more than 50% of your support for the year, they can claim you as a dependent even if you move out in April. Support includes housing, food, education, medical expenses, etc. For the education credits, whoever claims you as a dependent (your parents) would be eligible for the credits, not you. But there's an important catch - if your scholarships completely covered tuition, there might not be any qualified expenses left for them to claim credits on. They can only claim credits on expenses they actually paid out of pocket, not expenses covered by tax-free scholarships.

I'm super confused about my own similar situation - I have a 1098-T showing $19,500 in scholarships but only $17,800 in tuition. Does that mean I have to pay taxes on the $1,700 difference? I'm claimed as a dependent too. 😭

I went through this exact same situation last year and want to share what I learned! The key thing to remember is that scholarship money is only taxable when it exceeds your qualified education expenses AND goes toward things like room, board, or living expenses. From your post, it sounds like your scholarships cover tuition and housing completely. The portion that covers housing would be taxable income that you need to report. However, don't forget to include ALL qualified education expenses when calculating this - not just tuition! Required fees, books, supplies, lab fees, and required course materials all count as qualified expenses. Since you mentioned taking loans for course materials, make sure you're accounting for those costs. If you spent $1,500 on required textbooks and materials, that reduces the taxable portion of your scholarships by $1,500. The loan refunds are definitely not taxable income since you have to pay them back eventually. And you're correct that as a dependent, your parents would be eligible for education credits, not you. One tip: keep detailed records of all your required educational expenses (receipts for books, lab fees, etc.) because they can significantly reduce your taxable scholarship income. Many students miss this and end up paying more taxes than necessary!

This is such a common confusion for college students! You're absolutely right to be asking about this before filing. Let me add a few clarifications that might help: The excess scholarship amount that covered your housing IS taxable income that you'll report on your tax return. But here's something many students miss - make sure you're including ALL qualified education expenses when calculating what's taxable, not just tuition. This includes required fees, books, supplies, equipment, and even things like required software or lab fees. Since you mentioned taking loans for "course materials and living expenses," if any of those course materials were required for your classes, those expenses reduce the taxable portion of your scholarships. So if you spent $800 on required textbooks and lab fees, that $800 reduces your taxable scholarship income. Your loan refunds are definitely not taxable - you're correct about that. And yes, since your parents claim you as a dependent, they would be eligible for education credits if they paid any qualified expenses out of pocket. One important note: moving out in April won't affect your dependency status for this tax year. That's determined by who provided more than half your support for the entire year. The change might affect next year's filing though. Keep good records of all your required educational expenses - they can save you money on taxes!