Do I Have To Pay Taxes On My Grant Money?

Okay-- I am stumped here! I have gotten confusing answers from my research and tax professionals alike. Hoping someone can shed some light on this situation:
I was enrolled full-time in a degree program at a university in Spring 2012, and was awarded a $2100 pell grant and loans to cover my college costs. I received a refund, after all funding sources were in, of about $700. My 1098 from 2011 included my tuition costs for classes taken in 2011, as well as my classes for spring 2012. The total cost billed was 13,000. On my taxes, I claimed the legal limit of 4000 in qualified expenses for the American Opportunity Credit.
My 2012 1098 includes the $2100 pell grant I used to pay for my Spring courses, but the box for amount billed is empty since the school opted to include that tuition amount on my 2011 1098. I've been told that because the 2012 1098 has no "amount billed" I have to claim the $2100 pell grant as income and pay taxes on it. However, I don't understand why that is seeing as how the grant went to pay qualified tuition expenses in 2012-- even if those tuition expenses were "billed" in 2011. Is there anything I can do to, or do I have to pay taxes on this amount?
Thanks so much.
Posted: May 10, 2013

Best Answer

grants and scholarships used for educational expenses are not taxable
if you use any of the money for lodging, transportation, anything other than education, that would be taxable

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