Understanding form 1098-T for college tuition - do I owe taxes on scholarships?

Hey everyone, I'm in my junior year at university and trying to figure out this whole 1098-T form situation. Most of my college expenses are covered by Pell grant and other scholarships, but I still end up paying somewhere between $800-6500 out of pocket depending on the semester. Just got my 1098-T and I'm trying to understand what it means for taxes: Section 1 (payments received for qualified tuition and related expenses): $33,927 Section 5 (scholarships or grants): $26,984 From what I can tell, this means I paid around $6,943 out of pocket for school this year? What I'm really confused about is whether I owe any taxes on the scholarship/grant money in Section 5. Do I need to report the $26,984 as income somewhere? Or am I good since I didn't get any refunds? This is my first time doing taxes with school expenses so any help would be super appreciated!

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18 comments

Miguel Herrera

•8M

The good news is you likely don't owe taxes on those scholarships! Here's the basic breakdown: Your 1098-T shows the school received $33,927 for qualified education expenses and you received $26,984 in scholarships/grants. This means you paid about $6,943 out of pocket, which is correct. Scholarships and grants are only taxable if they exceed your qualified education expenses OR if they're used for non-qualified expenses (like room and board, transportation, etc.). Since your qualified expenses ($33,927) are higher than your scholarships/grants ($26,984), the scholarship money isn't taxable income. Make sure to keep your 1098-T for tax filing as you might be eligible for education tax credits like the American Opportunity Credit or Lifetime Learning Credit, which could actually get you money back!

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Miguel Herrera

•8M

If your parents claim you as a dependent, then yes, they would be the ones eligible to claim the education credits on their tax return, not you. The person who claims the student as a dependent gets to claim the education benefits, even if the student paid the expenses themselves. Tell your parents to look into the American Opportunity Credit especially - it can be worth up to $2,500 and is partially refundable, meaning they could get money back even if they don't owe taxes. They'll need your 1098-T information when they file.

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Connor Murphy

•8M

After dealing with similar confusion over my 1098-T last year, I found an amazing tool called taxr.ai (https://taxr.ai) that saved me so much stress. I uploaded my 1098-T and it instantly analyzed whether my scholarships were taxable and what education credits I qualified for. The tool confirmed exactly what the previous commenter said - scholarships aren't taxable as long as they're less than your qualified expenses. But it also found some additional qualified expenses I hadn't considered that made my potential tax credit even higher! The breakdown it gave me made everything crystal clear compared to the generic advice I was finding online.

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Connor Murphy

•8M

It absolutely helps determine which education credit gives you the biggest benefit. It compares American Opportunity vs Lifetime Learning based on your specific situation and shows you which one puts more money in your pocket - in most cases for undergrads, AOTC is better since it's partially refundable. As for doing it yourself, sure you can research it, but the tool eliminates the guesswork. It doesn't just give generic advice - it applies the tax rules to your specific numbers and circumstances. The time and stress saved was worth it for me, especially since it confirmed I was eligible for the full $2,500 credit.

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StarGazer101

•8M

I have to admit I was wrong about taxr.ai! After our conversation last week, I decided to try it with my son's 1098-T form since he's also in college. The analysis it provided was surprisingly detailed and helpful. It confirmed he was eligible for the American Opportunity Credit and walked us through exactly how to claim it. The most helpful part was how it showed that some of his book expenses weren't included on the 1098-T but still qualified for the credit! We would have missed out on about $400 in additional credits if we hadn't known to include those. Just wanted to update everyone since I was skeptical before trying it.

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Keisha Jackson

•8M

If you're still confused after getting your 1098-T analyzed, you might want to actually talk to someone at the IRS for definitive answers. I spent DAYS trying to get through to them about a scholarship question last year, but then I found this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in under 15 minutes. I was honestly shocked because I'd been trying to call them directly for weeks with no luck. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The IRS agent I spoke with cleared up my confusion about reporting scholarship income and confirmed I was filing correctly. Totally worth it for the peace of mind.

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Keisha Jackson

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Paolo Romano

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I need to apologize for being so negative about Claimyr. After our discussion, I was still having issues figuring out how scholarships affect my daughter's taxes, so I decided to give it a try as a last resort. It actually worked exactly as described. I got a call back in about 30 minutes telling me they had an IRS agent on the line! The agent confirmed that her scholarships weren't taxable since they were all used for qualified expenses and explained exactly how to document everything on her return. Saved me hours of research and uncertainty. Just wanted to follow up and say I was wrong in my initial judgment. Sometimes it's worth trying new solutions when the traditional methods aren't working.

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Amina Diop

•8M

Just another perspective - don't forget that what you do with scholarship money matters for tax purposes. If you use scholarship/grant money for qualified education expenses (tuition, fees, books required for courses), it's not taxable. But if you use it for room and board, travel, or optional expenses, that portion becomes taxable income! I learned this the hard way when I had excess scholarship money that went toward my apartment rent. Had to report that portion as income on my taxes. Your situation sounds different since your expenses exceed scholarships, but it's something to keep in mind.

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Amina Diop

•8M

Yes, you definitely need to report scholarship money that exceeds qualified expenses as income on your tax return. The school reports the scholarship amounts to both you and the IRS on forms like the 1098-T, so there's a record of what you received. The IRS may not immediately catch if you don't report it, but they can certainly flag your return later if they notice discrepancies between what was reported by your school and what's on your tax return. It's not worth the risk of an audit or penalties. Plus, depending on your income level, you might still qualify for education credits that offset any tax you'd owe on that excess scholarship money.

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