The amount on 1098 T box 5 is 4,000 more than on line 1. What is done with the excess amount on the income tax. Can I claim the excess difference as certain expenses such as food, textbooks etc.
I don’t think food counts. It’s not a qualified educational expense.
Do you have receipts to support that you spent $4000 on qualified educational expenses in excess of the scholarship award? If not…how can you claim this?
In trying to determine the tax status of scholarships and grants, don’t compare the amount in Form 1098-T box 5 (scholarships or grants) to box 1 (payments received for qualified tuition and related expenses). What matters is whether or not scholarship and grant money was used to pay for non-qualified expenses. If the amount of scholarship and grant aid received exceeded the amount of qualified expenses, the excess is taxable income to the student. Be aware that what’s reported on the 1098-T is supposed to be a snapshot of what happened in a particular tax year. Payments made for a certain academic period may have happened in a tax year different than that in which the academic period occurred.
The taxable amount of scholarships and grants is the amount above the total of tuition, qualified fees and books.
Any amount of scholarships or grants that paid for room and board and other no qualified expenses, are also taxable.
This is reported on the wages line of the student’s 1040 with SCH next to it.
If you want to claim an education credit, you might need to make more of the scholarship taxable.
I only had $700 in wages for 2019 and no other income. Do i still need to file income tax since this excess is considered income.
This question cannot be answered based on the limited information you have provided here. Unless you want to post all of your financial data relevant to your 2019 tax situation (not recommended), you should seek tax help from a competent provider.
Okay thank you. What is considered a qualified educational expense
The IRS has different definitions for this term, depending on which part of the tax code is at issue. The definition you probably want is in Chapter 1 of IRS Pub 970.
Are you the parent or the student?
The student reports the taxable scholarships.
I am dependent student, had income of only 700
Are your parents able to qualify for the American Opportunity tax credit?
Are they claiming you as their dependent?
Qualified tuition expenses for the education credit are tuition, qualified fees and books.
For determining tax free status of scholarships, qualified education expenses are tuition, qualified fees, books.
If you only had $700 in income, reporting $4,000 to $8,000 in taxable scholarships would still be under the maximum standard deduction of $12,200, so you would probably not owe any tax.
I am not sure what is American Opportunity credit and I am a dependent. My school this year University of Massachusetts was covered by scholarship totally . my parents income is under 50,000 with no other assets
Even if you don’t need to file taxes, you might want to anyway…especially if you will be completing a FAFSA in 2021-2022 academic year. If you do the 2019 taxes, you can use the IRS Data retrieval tool that year…otherwise, you will need to order a tax transcript.
Also, if you had any withholding from your $700 earnings…you probably will get those back. Every penny counts.
ok. thank you
You and your parents should see a tax preparer to see if your parents can claim an education credit on their 2019 tax return and to get help reporting taxable scholarships on your tax return.
Info about the AOTC is here
https://www.irs.gov/credits-deductions/individuals/aotc
is buying a new computer for class count as qualifying expense
The definition(s) of Qualified Education Expenses can be found in the IRS pub that is linked in post #7, above. Just remember that the definitions vary depending on which area of the tax code you are talking about. The IRS pub is a useful tool that is well organized.
thank you for that
also, kind of a dumb question… is year “2019 qual. ed. expenses” means for the academic year sept 2018-May 2019, or calendar year 2019 january thru december 2019
Probably for the 2019 tax year. which for most people is Jan. 1 - Dec. 31, 2019. But, context always matters. What are you quoting from?
just a general question, since i want to know which receipts to pull for what period