<p>My son received a scholarship and a laptop was included as part of the package. We received a 1098-T but the cost of the laptop was not included as part of the 'Qualified List'. Instead, my child received a separate 1099-Misc for the cost of the laptop and after doing his taxes, he owes $150 in Federal taxes, for this item. Is this correct?</p>
<p>I am confused and do not see a place on the tax forms to indicate that this was part of the scholarship.</p>
<p>Please help.</p>
<p>The instructions for a 1099-Misc are very clear in saying that it is not to be used for a scholarship or grant. So they issued the 1099-Misc in error. Can you get the organization to correct it? If your son’s scholarship money was not more than his tuition and books, then I would not include the laptop on his tax return. If he has taxable scholarship income, make sure that it shows up on line 7 on the 1040 and not “self-employment” income.</p>
<p>No - they issued the correct form. It is not a scholarship or grant, it is a “prize” awarded in connection with the scholarship. This should have been reported on line 3 of the 1099-misc. You would receive this same form if you won a prize from some sort of contest.</p>
<p>This is reported on line 21 of the 1040 tax return, and for kiddie-tax purposes, it is considered investment income. If it has value more than $1900, it will be taxed at YOUR tax rate, not his. I’m sure this came as a surprise, but $150 tax due sounds about right.</p>
<p>Make sure he reports any portion of the scholarship used to pay room & board or transportation expenses as taxable income (again on line 21). If he had a full tuition scholarship, check if it was required to be used for tuition, or if it could be used toward room & board. If not, your only expenses to use toward the American Opportunity Credit will be books and possibly fees (if he didn’t have scholarships to cover those too).</p>
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Apparently not clear enough for the colleges. Or maybe it depends on your definition of “scholarship” or "grant. My son has been receiving a 1099-misc for his stipend for the last four years. Maybe the school for the OP does not consider the laptop as a scholarship or grant, but maybe an award: </p>
<p>This is in the instructions for the 1099-misc:
I guess they consider the laptop a “prize or award”.</p>
<p>OK, I stand corrected. Edbrady1 said that the laptop was part of the scholarship, but if it was a prize instead, then it would go on line 21.</p>
<p>CTScoutmom – You say “Make sure he reports any portion of the scholarship used to pay room & board or transportation expenses as taxable income (again on line 21).” I think you’re very knowledgeable and I hesitate to question you, but isn’t a taxable scholarship (not the laptop prize, but, say, scholarship money used for room and board) included on line 7 and not line 21?</p>
<p>Excess scholarships go on line 7, not 21. (Print ‘SCH’ next to line 7).</p>
<p>And put the taxable scholarship amount after the SCH.</p>
<p>Sorry, if doing by hand, scholarships will go on line 7 (for full 1040), but some software programs will put it on line 21. If you’re using software, don’t be alarmed if your printed 1040 shows the scholarships on line 21 (the tax treatment will be the same).</p>
<p>Tax treatment may or may not be the same. Line 7 scholarships are considered earned income for purposes of the standard deduction. Line 21 is not.</p>
<p>Thank you for this thread. S1 & S2 also received laptops as part of scholarships. S1 never received a 1099 but instead received a letter informing us that there could be tax implications. I wasn’t sure how to treat it since computers were acceptable purchases from a 529 plan. Your thread was very helpful.</p>
<p>Who gave the prize, and is the laptop required by the School? If the laptop is required by the school, then it might be deductible as an education expense.</p>
<p>‘Deductible’? Do you mean ‘excludible’ from Line 7 as a qualified education expense?</p>