Is my financial aid taxable income (student 1098T tax form explanation)?
In general, students do not pay taxes on scholarship money used to pay for certain expenses related to the student’s education. The IRS calls these “qualified education expenses” which include: 1) tuition, 2) student fees, 3) books, and any required equipment or supplies for courses taken. However, if a student has scholarship or grant money left over after covering these qualified education expenses, the student must include that excess amount as gross taxable income. That means scholarship or grant money used to pay room, board, rent, utilities, or other living expenses, count as income when calculating your tax liability. Students will receive a 1098T tax form from the CTSFW Business Office at the end of the calendar year which will identify these items. In box 1 of the 1098T, all payments received for qualified tuition and related fees from all sources during the tax year are included (with the exception of health insurance payments). In box 5 of the 1098T, any scholarships, grants, student adoption funds, or special gifts that were processed by CTSFW during the calendar year for payment of the student’s cost of attendance are included. The student would then be required to report as taxable income the amount of box 5 minus the amount in box 1, minus the cost of books and supplies for the calendar year. If you have further questions about tax preparation, please consult a professional tax preparer.