Our older child does not receive financial aid but does receive a merit scholarship at his school for tuition + $3k. The remaining cost ($10k) is paid directly by my employer as a job benefit and is included in my W2 as regular income (on which I pay taxes). We receive a 1098-T from the university and it shows the $3k + $10k employer contribution in excess of tuition. We then owe taxes additionally on the $3k (having already paid taxes on the $10k).
I am now filling out FAFSA for kid #2, and there is this question: “Student college grant and scholarship aid reported to the IRS in your parents’ income.” I’m not quite sure what to include here. I assume this means for ANY child (and not the one I’m doing the current FAFSA for), but correct me if I’m wrong. I also assume at least the $3k (is that correct? It’s not exactly parent income on our 1040 so I’m a little confused). And because the additional is included literally as W2 income and not as a separate item, do I also include that? I’m confused because it may appear that our income is $10k more twice (on our W2 and on the 1098-T). I hope this makes sense. Could someone advise on this?
The tax on the $3,000 would be owed by the student on their taxes. The $3,000 in income is included in the student’s AGI, so it is reported there. They respond to the question you reference by stating $3,000; this is then removed from income in the FAFSA formula. If the student didn’t have to file a 1040 because income (including the $3,000) was too low, then the $3,000 is not reported on taxes or on FAFSA. The $10,000 is not scholarship so is not reported as such.
kelsmom, Thank you so much. That clarifies. Son didn’t have to file a 1040. And correct that the 10k isn’t a scholarship. I didn’t even think about that.
But UGH! Now I’m on the CSS Profile and it asks “Employers, (i.e. tuition benefits) including their parents’ employer(s) and/or their employer”. I honestly don’t know how much my employer will contribute (this benefit may be going away entirely bc of covid). Plus, since it is counted as income, is it to be noted here?
All employer tuition payments have to be counted as income. The first time we did Profile, there was an employer payment. They didn’t offer payments the following year. We knew that up front, though, so we didn’t include it the following year.
Okay. Thanks, again. I think I may just add something at the end in the comment box. We don’t know if employer will continue benefit and/or how much it will be.