from the IRS regarding athletic scholarships…
- Enter the amount from line 3 that your scholarship or fellowship grant required you to use for other than qualified education expenses 4.
>>
[/QUOTE]
It is telling you to also subtract the amount that you are REQUIRED to use for “other than qualified education expenses” <= that would be a meal plan and housing that an athlete is REQUIRED to use his award for.
http://maloneynovotny.org/news-resources/tax-tips/2014/tax-alerts-080414.html
https://www.law.cornell.edu/uscode/text/26/117
I’m still not finding what you are referring to. Section 117 is the controlling section. Section 119 doesn’t apply because the students are not employees according to the IRS. Everything I’m finding says athletic scholarships are treated like all other scholarships, exempt if used for QEE, taxable as unearned income if used for anything else. Publication 970 doesn’t instruct to treat them any differently than a merit or need based scholarship.
When the student signs the National Letter of intent, the form designates what amount or percentage is given for tuition, room and board, books. Each section can be 100%, but they aren’t all lumped together.
If you have any other information, I’d like it. I’ve searched “IRS and athletic scholarships” “IRS football scholarships” (because D1 football are headcount), ‘tax treatment of athletic scholarships’. ‘do football players pay tax on scholarships’ " IRS athletic scholarships" but nothing different comes up. I read Section 119 and don’t see athletic scholarship" My daughter’s money was included in her 1098T with all the other scholarships.
Honestly, if Pell grants used for breakfast are taxable, why wouldn’t football player’s breakfasts be taxable? Athletic scholarships are not refunded to students unless the school does not have dorms or a cafeteria, so all athletes would have their scholarships applied to required room and board.
I don’t know the backstory as to why athletic awards are handled differently, but they are. If they weren’t, then the IRS wouldn’t have a separate instruction section for them. Instead, they’d just be listed with the rest.
Athletic Scholarships
An athletic scholarship is tax free only if and to the extent it meets the requirements discussed later.
Worksheet 1-1. You can use Worksheet 1-1. Taxable Scholarship and Fellowship Grant Income to figure the tax-free and taxable parts of your athletic scholarship.
Worksheet 1-1.Taxable Scholarship and Fellowship Grant Income
If you are a degree candidate at an eligible educational institution, go to line 2.
If you are not a degree candidate at an eligible educational institution, stop here. The entire amount is taxable. For information on how to report this amount on your tax return, see Reporting Scholarships and Fellowship Grants , earlier, in this chapter.
I don’t know where this is from (I’ve searched), but the answer is line 9, that the taxable scholarship is lines 2 (earnings) 4 (amounts other than QEE) and 8 (any excess of QEE) So the most the tax free scholarship can be is QEE.
Example:
Same results. Room and board and any amounts received over QEE is taxable whether an athletic scholarship or academic, state grants, Pell. There is no free lunch. Why is there a separate worksheet? No idea.
Let me clarify my initial question … Low EFC, equivillancy sport.I was told the financial aid I would get would be greater than the athletic $$ ( 1/4 scholarship =$12500 per year)I would receive. And I could NOT get BOTH athletic and need based aid. Can somebody confirm this? Thanks
Yes, that is correct. See post #7
If your school is saying that the institutional grant will be greater than the athletic, then take that. That allows the team to give its money to another player. This is often the case at schools that give great need based aid (Stanford), but the school needs to award the need based aid to athletes under the same conditions it gives that money to any non-athlete student (same with merit, under the same conditions as to non-athletes), so don’t be surprised if the athletic department and the financial aid department ask you for a lot of documentation.
However, you will then be a walk on, not a scholarship athlete and may have given up some benefits. Check.
Who told you that? The college? I’m not an expert on this, am trying to get up to speed, but my impression is that you can get both depending on if the school will offer it. I don’t think there is any rule against it.
Your first post referred to Federal Aid which is max 5,770 per year. That obviously does not exceed 12,500. So you are going to have to be more clear. Is there an offer to you for institutional aid to meet need? What does it look like COA and the aid?
If the school will give you a larger-than-12500 need award then wouldn’t it be better to take that so you will not have to worry about affording the school if you get dropped from the team, injured or want to quit?
There is an NCAA rule against it, @BrownParent. You can’t take institutional need based aid. If the schools could just award need based aid to athletes, it would basically allow schools to stretch the $10-12-15k scholarships allow in each sport to $20-25-30k by making every award 1/2 need based, 1/2 athletic.
Federal aid isn’t the issue (it’s allowed), it’s the school need based grants. Merit is okay. Why would the student want athletic aid if he can get more as need based aid? Probably wouldn’t, but as I said above then the ‘student athlete’ would be a walk on and not an athlete until he/she makes the team, including perhaps not being allowed to join summer practices, move in early, and until last year, eat with the team (including at practice). A walk on isn’t treated the same as a scholarship athlete, especially by the team. It’s just a fact. If the awards were very close, I’d take the athletic.
Athletic awards are not withdrawn for the academic year if the athlete is dropped from the team, injured, or even if the athlete quits. Once awarded, they are the student’s to keep. Rules are also changing to guarantee them after sophomore year, even if the athlete quits.
If it is truly need based institutional aid, it would be granted in the following years too, right? It’s NEED based, so available to any student who meets the conditions, even an athlete who has quit a team, even a sophomore student who had need met through an outside scholarship as a freshman but now has need for years 2-3. The student athlete who takes a $12,500 athletic award or a $12,500 need based aid award is in the same position, and the same offers should be there the next year.
@redandwhite sorry for post #26, too late to delete it, please ignore.
@twoinanddone thank you so much for clarifying that, I was just going to post in the athletic forum. Maybe I still will to discuss. Because I found an old thread where a D1 mom said she got athletic for tuition, books and part R&M and then need aid for the rest. Hum so much to digest.
^
It that person got athletic for tuition, books, and “part” room and board, then not much left to cover. The school could have awarded full pell and SEOG to cover the rest. (if full Pell qualified). Since the parent is saying the rest was need based, then they would have had a very low EFC…perhaps zero.
and we don’t know if the “need aid” included any loans.
It also depends if a particular sport program is fully funded, i.e. offering max number of allowed athletic scholarships. If not then it may offer additional opportunities to combine need-based and athletic aid.
@CCDD14, the NCAA school cannot combine institutional need based aid and athletic, and it doesn’t matter if the team is 100% funded or 5% funded-although if it’s 5% funded, unlikely to be a lot of athletic scholarships. I think the rules are different for NAIA, so maybe that’s what some people are referring to. There are still LOTS of types of need based aid that can be combined with athletic aid from the school; it is only institutional need based aid that can’t be combined with an athletic scholarship.
My daughter gets 1) merit aid and 2) two non-need based grants from her school plus 3 )an athletic scholarship. She also received 4) a pell grant, 5) a state (non-need) grant, 6) a state scholarship, and 7) an outside scholarship. This year she might get work study too. What she can’t take is a school need based grant.
@twoinanddone,
Quick search shows, for example,
http://www.athleticscholarships.net/2013/09/12/how-financial-aid-trends-affect-college-athletes.htm
"In general, when need-based aid is combined with athletic scholarship dollars, the need-based aid counts as if it were athletic scholarship. "
So it seems if the NCAA sport is underfunded there are opportunities to award need-based aid.
Yes, I was wrong and that is correct if the team is under its maximum scholarship funding, but it wouldn’t seem to help the school any to underfund the athletic team and then give it to the players as institution aid. Same amount of money, different pot. If the scholarships are fully funded though, or if the school provides excess need based aid, the team will be over its scholarship limit.
The article you posted says exactly what I said - athletic aid can be combined with merit aid without counting toward the team total. If it is need based aid, it may count toward the team total, so same money/different pot, the total number of scholarships for the team doesn’t change.
There are very specific rules about what scholarships walk ons can take because they could be counted toward the team total.
From the article: “So while financial aid leveraging is causing larger awards to be chopped up into smaller grants, if the original awards were need-based than athletes might not be allowed to accept them since they would have pushed the team’s total equivalency over the limit. An athlete who is receiving any athletic scholarship might get more out of a $3,000 merit-based grant than a $12,000 need-based grant because the former can be combined with the athlete’s athletic scholarship at no penalty to the program.”
^
I’m not sure that is true. I think that is exactly what @twoinanddone has explained. If a scholarship isn’t fully funded, then the school can’t mix partial athletic with some institutional need based aid…likely because it would appear to be a “back door” approach to handing out more full head awards.
The ivies “no athletic scholarships” rule can be a bit of a joke. Since they give excellent need based aid (which only they determine), unless a student is affluent, they can pretty much fully fund most of their athletes.
There was a father on CC a few years back who had a very high income. His child was a desirable athlete for one or more ivies. He ended either getting a full ride FA, or nearly a full ride FA award. It was a joke. I’m sure if the NCAA had investigated, the school would have had a hard time justifying THAT away in comparison to non-athletes’ awards with similar financial circumstances. This student was also a highly desirable male URM. I don’t know if that also “inspired” the school to be extra generous.
Some of the private schools do not want to give athletic money in minor sports to rich students. So some underfund sport programs but provide good need-based aid. Others may offer athletic aid only to students with financial need. I even saw the question - are you a recruited athlete? on an NPC.
@mom2collegekids, it is technically true that the award letter can say:
Athletic scholarship: $3000
University need based grant: $3000
but the team total doesn’t change and all $6000 is counted against the total team allow scholarships. If the award is:
athletic scholarship: $3000
merit aid: $3000
the only the athletic scholarship is counted in the team total. What the article is saying is that more schools are awarding merit aid to athletes (non head count sports), which is fine but then the school has to make those awards available to all students. My daughter applied for a scholarship from her high school booster club. If she had won (she didn’t) that $1000 would have been counted against the team total too because it was an athletic based scholarship. That’s another back door the NCAA doesn’t allow, for a booster to give money to athletes to avoid the cap.
I guess a school that has a limited athletic budget but an overflowing need based budget might make the award as an institutional need based grant, but it doesn’t really help the student or the team, the money is the same. Stanford can award the money as need based, but then the walk on rules kick in and the athletic department has to justify the number of athletic awards given.
<<<
What the article is saying is that more schools are awarding merit aid to athletes (non head count sports), which is fine but then the school has to make those awards available to all students.
<<<
Absolutely. A school can’t “create” scholarships that are only given to athletes.
The same with dorms. They can’t create dorms that are only for athletes; this is to prevent a school from having a super-deluxe dorm for athletes only.
I have to laugh at the football dorm at my kids’ school. It’s very nice, but because they have to let non-athletes stay as well, the others are all male engineering students.
I’m sure that my kids’ undergrad finds that their automatic merit awards come in handy with some of their higher stats athletes who aren’t full head. What happens if the awards end up higher than COA?
I see what you’re saying about counting the whole $6k against the team if $3k is university need-based. Just another way to prevent schools from “playing games” with money.