Taxpayer Relief Act of 1997
for University of Wisconsin Campuses
Examples of 1098T situations
Example 1. In 2003, Jackie paid $3,000 for tuition
and $5,000 for room and board at UW-Madison. The university did
not require her to pay any fees in addition to her tuition in order
to enroll in or attend classes. To help pay these costs, she was
awarded a $2,000 scholarship and a $4,000 student loan.
The scholarship is a qualified scholarship that is excludable from
Jackie’s income, and, for purposes of figuring an education
credit (either Hope of lifetime learning); she must first use it
to reduce her tuition (her only “qualified expense”).
The student loan is not considered “tax-free educational assistance,”
so she does not use it to reduce the qualified expenses. Therefore,
Jackie is treated as having paid only $1,000 in qualified expenses
($3,000 tuition - $2,000 scholarship) to UW-Madison in 2003.
Example 2. The facts are the same as in Example 1, except that Jackie reports her entire scholarship as income as on her tax return. In this case, the scholarship is not treated as a qualified scholarship. Therefore, it is allocated to expenses other than qualified expenses. Jackie is treated as paying the entire $3,000 tuition to UW-Madison with other funds and can figure her education credit on the entire $3,000.