In order to calculate the qualified expenses that you can claim, Form 1098-T from your school is needed.
According to the IRS you must reduce any amount of qualified expenses by the amount you received as scholarships and grants. Scholarships and Grants cannot be included in the amount of qualified expenses. The program will automatically choose which credit or deduction benefits you the most based off how the questions are answered in the program.
1098-T scenarios:
If you have an amount in Box 1 of Form 1098-T and there is no amount in Box 5, then your qualified expenses would be that amount plus any other qualifying expenses such as books and supplies.
If you have an amount in Box 1 and also have an amount in Box 5, you must subtract Box 5 from the amount in Box 1. This total would become the qualified expenses plus any eligible books and supplies. For example, Box 5 is $1000 and Box 1 is $3000, then the qualified expense amount would be $2000 plus any books or supplies.
If the amount in Box 5 is greater than the amount in Box 1, then you are not eligible to take an education credit. For example, if Box 5 is $5000 and Box 1 is $2000, you are not eligible for a credit. If the amount in Box 5 for scholarships and grants was used for educational purposes you do not have to report the amount. If the amount was not used for education then you must include that amount as income on your return.
To include this amount as income in program, go to:
- Federal Section
- Income
- Select My Forms
- Less Common Income
- Other Compensation
- Scholarships and Grants