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Scholarship Taxing Question! State programs and prepaid programs

mom2collegekidsmom2collegekids 84095 replies1025 threadsForum Champion Financial Aid, Forum Champion Alabama Forum Champion
If someone has a state prepaid tuition program and also earns a state scholarship program (like HOPE or Bright Futures), can they claim that the H or BF monies went to tuition and the prepaid monies went to room and board to avoid paying taxes on the scholarship portion?

@twoinanddone What do you think?
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Replies to: Scholarship Taxing Question! State programs and prepaid programs

  • mom2collegekidsmom2collegekids 84095 replies1025 threadsForum Champion Financial Aid, Forum Champion Alabama Forum Champion
    edited September 23
    Follow up questions...

    Do schools send 1098-T forms to students receiving Hope, Bright Future, or other similar state tuition programs? And if the money was used to pay tuition only (QEE), do they just not report the 1089-T on their tax return?

    Edit to correct typo
    edited September 23
    Post edited by mom2collegekids on
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  • thumper1thumper1 74793 replies3278 threadsRegistered User Senior Member
    They are 1098T forms...

    Those forms are what the school generates but really, parents should keep their own records. There are qualifying expenses that schools know nothing about and are not included on the 1098T, like books and required supplies.

    Frankly, keeping good records and documentation is more important than what appears on the 1098T.

    For any scholarships...you need to do your due diligence on what they can be used for. Some are very clear that they must be used for tuition and fees only. Others can be used for other expenses.

    I don’t believe you “report” a 1098T on your tax return.

    @BelknapPoint
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  • BelknapPointBelknapPoint 4478 replies16 threadsRegistered User Senior Member
    I don’t believe you “report” a 1098T on your tax return.

    Right. A 1098-T is for informational purposes only, and often it's bad (or at least incomplete) information.

    Also echoing that how Hope, Bright Futures or any other scholarship or savings plan money can be allocated depends on the terms of the particular program.
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  • mommdcmommdc 11379 replies31 threadsRegistered User Senior Member
    Schools now have to report on the 1098T how much in qualified education expenses was actually paid during the year. No longer what was billed. And they report how much was received in scholarships and grants.
    But a school is not required to issue a 1098T if scholarships and grants exceed QEE paid.

    The 1098T form is required to be able to claim education credits.

    You can use it to figure taxable amount of scholarships but that isn't the use it was intended for.

    You can and might have to use your own records to figure out the taxable amount since not all qualified expenses might be listed on the 1098T and/or some scholarships might not be listed on the form.
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