<p>my D just received/won few small outside scholarship, but her school FA policy stated that (outside scholarship reduce student loan/FWS and then it will reduce school grant) since my D got full ride without loan or fws, it will cut down her college institution grant. Any suggestion? And can anyone explain if we decide to accept the scholarship how does it affect her filing tax next year? we are leaning toward rejecting the scholarship so that someone else can benefit..</p>
<p>Some people mistakenly say full ride when they mean full tuition so can you clarify which it is. Full ride includes room and board and sometimes books. It may depend on how small is small with regard to the outside scholarships. I would call the school to make sure they would reduce the grant.</p>
<p>As for her tax situation, it doesn’t matter if the funds come entirely from a grant or some of it is from outside scholarships. Grants and scholarships in excess of qualified education expenses(tuition, mandatory fees and mandatory books and supplies) is taxable to the student. In almost all cases it’s better for the family overall for the student to file as a single person who can be claimed as a dependent on someone elses return and you claim her as a dependent. That assumes she does not provide 50% of her support. Scholarships and grants do not count as support the student provided to herself. For tax year 2011, if the student’s taxable portion of scholarships and grants plus income from working and other income exceeded $5800 the student needed to file a return and pay tax. That number could change next year.</p>
<p>It’s probably a wash…as long as the outside scholarships are also 4 year or if next year the institution amount will go back up when those go away. Really a question for the financial aid office.</p>
<p>It’s a confusing concept, but there is a limit to how much scholarship money you actually receive. D2 is fully covered at her school. She has instate lottery tuition money (state) plus NMF $10,000 plus money as scholar finalist. She also had a few outside scholarships. Great deal since she gets anything left over after paying tuition/R/B back as overage check, BUT there is a limit. It is some fed formula that figures COA for purposes of financial add. She had more $ than that so the school started lopping things off. Taking the small outside scholarship just reduced the amount of one of the other scholarships for the year.</p>
<p>Annoying is right about taxes. No matter what, anything above tuition, books and fees is taxable. In other words, the value of what you get for room and board plus obviously any overage is taxable to her. For us that meant D2 owed taxes this year since this was a total value of about $8000 total and of course no taxes withheld.</p>
<p>@ annoyingdad, yes D received full tuition&fee,room and board, expense to cover her books,travel, etc…She recived one scholarship for $2000 and two others for $1000 each. when D apply for scholarship back in January, we had no idea she will gain admission to this school with full Aid covering her COA. let alone winning the outside scholarship! @scmom12, does that means we need to start saving for tax? even if it was college grant awarded base on needs to cover room&board?</p>
<p>Yes…about the taxes…doesn’t matter if it’s need based grant or merit scholarship. The taxes will be your D’s not yours, based on her income. Money for tuition and books aren’t taxed. After that, the first $5k or so of these “earnings” aren’t taxed.</p>
<p>Since your D is getting expense money, she should probably economize so that some of that can go towards taxes.</p>
<p>Your D’s lucky that her entire COA is all grants. Usually there’s some work-study or something else in there.</p>
<p>Congratulations to your daughter!</p>
<p>Yes, she will owe taxes on the amount of the grants and scholarships that is used to cover room and board, travel, etc. The IRS considers that to be income. Also, check with your state because states differ on what is taxable income.</p>
<p>Doesn’t sound fair, but we prefer to look at it this way: better to have to pay taxes on the $12,000 in excess grants/scholarships that my daughter received than to have had to pay (and borrow some of) that $12,000!</p>
<p>Yes, both need based and merit aid that covers room and board and anything else other than qualified education expenses is taxable. Keep in mind for the 2012 tax year there should only be 1 semester of this taxable amount, unlike future years. You could go through the exercise of filling out a 2011 1040EZ for her including the taxable grant amount and any W-2 earning and interest earnings she may also have to get an idea of how much she will owe. </p>
<p>If you live in a state with an income tax, check to see how the state treats scholarships and grants.</p>
<p>D also received a full scholarship (tuition, R&B, fees,books,laptop etc) and an outside scholarship worth $4000, $1000 a year for 4yrs. The outside scholarship is sent to the school and even though the policy says the school will keep the money, they contacted her and said they will allow her to keep the money for misc expenses and every semester she receives a check for $500!! She also applied for the outside scholarship before receiving the full ride. As far as taxes, yes she does pay but its a small price to pay.</p>
<p>thank you all for helpful advice regards to tax situation. Now I need advice whether to accept or reject scholarship…</p>
<p>Depends on how you pay. We “paid” for spring term before Jan 1 so we had a whole year of taxable income. Obviously, if you wait until after Jan 1 then only fall semester the first year.</p>
<p>Sometimes outside scholarships do go directly to student and not through school (you can tell by how the check is made out:)) and then you can keep, but most you have to sign over to school.</p>
<p>As someone said, I’d rather pay a little tax and have no debt after 4 years of school and technically D2’s overage money in her savings could be used for taxes, but we want her to save it for other opportunities. How much tax depends on your tax status…may not be much at all if in lower bracket. </p>
<p>Also, D2 got computer as part of scholarship. School sent us 1098(?? not sure of number) form for the value since it also was taxable.</p>
<p>I would accept it. If the school uses the money to reduce their grant, then I would look at it as giving back to a school that has been very generous. Also whoever gave the outside scholarship may not be able to pass it to someone else.</p>
<p>I will contact org. that award her the scholarship to see if they can pass it to someone else in need, otherwise I"ll guess D will just have to go ahead and accept the scholarship,since the check will be send directly to her school. Thanks everyone for great advice :)</p>
<p>I had my S reject the outside scholarship that he received. While I suppose it is possible that the school would allow him to keep it, all of the email correspondence I’ve had made it clear they wouldn’t (he’s in a nearly identical aid situation as your D). If he receives any additional scholarships from national organizations, he will keep and report those, but the one he received was local and he personally knew many of the interviewees and wanted to help them.</p>