I have a question about 1098-T reporting. I've tried to make sense of it myself, but all I've done is make my head hurt.

My son started college in Fall 2023. The 1098-T wasn't even on my radar last year, so it got completely left off of our taxes. He had no other income, but I am still claiming him as a dependent.

I got an email about the 1098-T forms from the school today, so I had him go pull them and send them to me.

The form for 2023 has a value in box 5 that is less than box 1 - so no issue there since I didn't report it on my 2023 taxes (and I wouldn't have qualified for any deductions/credits anyway, so I didn't miss out on anything).

The form for 2024 has a number in box 5 that is greater than box 1. I had already filed taxes for both of us. He had a job this past summer that earned about $4k, so I filed a separate return for him, too.

I just did his amended return. The difference between box 1 and box 5 still keeps his income less than the $5900 standard deduction, so it didn't change anything. I just went ahead and filed the amended return to cover myself. He didn't qualify for any deductions because the "someone else can claim me as a dependent" box was checked.

However, if he had not worked this summer and had his own W-2, would I have had to report the 1098-T numbers on my taxes? In that case, would I have owed taxes on roughly the $1400 difference between box 5 and 1 based on my income/tax bracket?

I'm asking because for 2025, he will be getting his scholarships for 3 semesters (Spring, Summer, and Fall) but will likely not work/have any earned income or a W-2.

Will I be able to file a separate return for him just to cover the 1098-T, or will it have go on my 2025 return? I don't really want to pay any taxes on this "funny money" at my tax rate. It's not even really income. This past year, he didn't even get the full difference back. The school kept pretty much all of it to pay required fees that aren't considered allowable education expenses by the IRS (ie, he lived in the dorm in spring of 2024).

The scholarship income is his to report whether he has other income or not. It will not be reported on your tax return.

Scholarship income is earned income for standard deduction purposes but not for kiddie tax purposes. That means he will be allowed up to the full standard deduction ($14,600 in 2024) but if his income his higher than that he may have to pay tax at your tax rate.

That's helpful. I was wondering if I can even file a tax return if he has no W-2, 1099, or other earned income. The only thing we end up having to report may be the 1098-T.

It also seems stupid to me that potentially taxable "income" is reported via a 1098-T.

I highly doubt he will make any money this year, since he will be going to school full time, even in the summer. So, he should still be under the standard deduction threshold.

I think I can still even claim him as a dependent and get my $500 credit. That just makes us both ineligible for any education credits/deductions.

You probably will not need to file a return for him if he is under the standard deduction. I have not seen them ask for a return for scholarship income and if they do, you will know that the result will be zero anyway.

He is still your dependent. There is no income test if they are a full-time student and under the age of 24 at the end of the year. He just has to live with you (or temporarily away at school) for more than 1/2 the year and not provide more than half of his own support.

Unfortunately, being able to be claimed as a dependent of another keeps him from claiming the education credits so if your income is too high then no one gets to claim them.

Yeah, I figured that out about the credit. I can't get it because I make too much and he's my dependent. We might have gotten a little more back if I had not claimed him and he took the credit, but it wouldn't have been much.

I got $500 for him, and the only measurable "education expense" we had was a $700 computer.

Since I had already filed for us both, and he was getting a refund already, it was easier to amend his claim rather than mine.

I guess it makes sense that if he has no W-2 or 1099 income, the IRS wouldn't expect us to file a return just for the 1098-T. I just don't want to risk an audit.