This is directly from a 1098-T form received by our youngin' this year:
quote:
A college or university that received qualified tuition and related expenses on your behalf is required to file Form 1098-T ... with the Internal Revenue Service. A copy of Form 1098-T must be furnished to you. The information being reported to the IRS verifies your enrollment with regard to certain eligibility criteria for the Hope Tax Credit, the Lifetime Learning Tax Credit and Higher Education Tuition and Fees Deduction. However, the enrollment information by itself does not establish eligibility for either credit or deduction.
The 1098-T form shows the payments received for "qualified tuition and related expenses", as well as the scholarship and grant moneys given to the student. These numbers CAN (and in AJ's case, do) reflect money received for the academic period from Jan-Mar 2004 ... as well as tuition and fees for that period. Unfortunately, it skews the numbers incorrectly, and in AJ's case, overstated the scholarship money quite a bit (actually ... 25% by adding an extra quarter's worth of scholly money to the total).
But here is another (sad) note: If a student files a tax return on their scholarship money AND if he is still claimed as a dependent ... and here is the annoying fact ... then he cannot deduct his tuition and fees to offset his scholarship. Even if a student were able to deduct expenses (i.e., not claimed as a dependent) books and living expenses are NOT considered deductible expenses.
Now, the real question ... does he even bother to file a tax return on his scholarship money? Some do, some don't ... it is a personal decision.