How does the 1098-T form relate to scholarships and taxes?

I'm starting to think about taxes and how college scholarships might affect them. I recently heard about the 1098-T form and I'm not quite sure what it does or why it's important. Specifically, I'm curious if scholarships are taxable through this form.

If I get a scholarship to help pay for my tuition, does that mean I have to report it as taxable income? I know this form is something colleges provide, but what exactly does it mean for a high school student preparing for college finances? Any details you can share about how to handle taxes in relation to scholarships would be super helpful!

Form 1098-T serves as your tuition statement. It's issued by colleges, universities, and other eligible educational institutions to both the IRS and the student. It provides the total amount of qualified tuition and related expenses, as well as other related information.

As a high school student, you won't have to worry about this form just yet. It will become relevant once you've started college and paid tuition. You'll receive a 1098-T form from your college, usually by January 31st of the year following the tax year.

Now, when it comes to scholarships and taxes: whether scholarships are taxable largely depends on how the funds are used. Scholarships, fellowship grants, and similar types of assistance used for tuition, fees, and required supplies, books, and equipment are generally tax-free, i.e., they don't need to be reported as income on your tax return.

However, if the funds are used for non-qualified expenses, like room and board, travel, research, etc., there may be portions that need to be reported as taxable income. Amounts used to pay these costs are considered part of your taxable income and should be reported on your tax return, even if they don't show up on your 1098-T form.

So, as long as you use your scholarship for qualified tuition and related expenses, the scholarship is generally tax-free. But to be on the safe side, it's always worth consulting with a tax adviser or someone with knowledge about tax laws. They can provide advice based on your specific situation.