<p>A few days ago, I received my financial aid offer from my #1 choice college (UW-Seattle). My full need is met (EFC <3000), hooray! However, I have applied to 20+ outside scholarships and am still waiting to hear back from most of them. I've already received a $1,000 outside scholarship. </p>
<p>Because scholarships are taxable, would it be better (for tax purposes) to not accept any future outside scholarships? I don't need them at this point, anyway.</p>
<p>Congratulations on getting a good financial aid package.</p>
<p>I would not turn down any scholarship money because of tax reasons. After all 80% of $1000 (assuming a 20% tax rate) is still $800 left - why would you turn it down. Any of your current grants and/or scholarships that exceed tuition/fees/books are going to be taxable - you wouldn't turn them down because of that.</p>
<p>The other thing to consider is how your financial aid package is constructed and how your school handles additional scholarship money. Most schools will reduce need based aid when additional scholarships are awarded/won. But generally they will reduce the loans and/or work study portion of aid before any grants are reduced. So if you have loans or work study it is great to have them replaced by scholarship money.</p>
<p>Also remember that your parent's financial condition could change and your need based award could be lower next year. If any of those outside scholarships are renewable, they could really help in the future.</p>
<p>Some schools will let you make one purchase of a laptop using scholarship money in excess of your student contribution. Check with your school to see if they will.</p>
<p>Of course I don't have any details about your financial aid package, but keep in mind that any aid that you recieved that goes towards room and board is also taxable. </p>
<p>Let's say that your room and board total is 10K, you are paying 3K, you have 5K in loans, 1K in WS and the other 1K is in grants. The 1K is taxable. </p>
<p>Now, you just got a 1K scholarship and the school lets you reduce your loan by that amount you now have 2K in taxable aid. </p>
<p>Take it one step further and assume that you earned 3K over the summer. Add the 2K to that and you now have 5K in taxable income. However, with the standard deduction of 5350, you do not have any tax liability. </p>
<p>Worried the tax liability beyond the standard deduction??? You will only be in the 10% federal tax bracket. So for every 1K you earn you pay 100 in federal taxes. (state tax varies depending on your state)</p>
<p>So, my advice, keep racking up those scholarships, and reduce your loan amounts. It is so worth it. Of course, you need to remember that federal law does not allow you to receive aid in excess of your EFC. In that case your grant money may be reduced dollar for dollar (not worth it) But, as the previous poster mentioned you may be able to apply some of it towards the cost of a computer.</p>
<p>Oh I didn't know that any grants/scholarship that goes towards room and board is also taxable. I received ~17K in federal and state grants, university tuition exemptions, and university scholarships. Tuition and room and board is ~14K (room and board alone is ~7K). Total COA is ~19K.</p>
<p>UW uses outside scholarships to first reduce loans and workstudy, and then grants and university scholarships. I don't have any loans and workstudy, so it would reduce my grants and scholarships. However, I do have a parents' contribution of ~2K, can the outside scholarships reduce that?</p>
<p>You guys brought up really good points. I guess I will accept any future outside scholarships since the grants I have now that go to room and board is taxable anyway. The renewable scholarships would really help for future years, too.</p>
<p>Also -- is the cost of student health insurance covered by your current FA award? What about the cost of a computer? Do you live far enough from the college that you will have to fly? </p>
<p>You can ask the college to adjust your COA (cost of attendance) based on those factors and use the extra scholarships for those costs.</p>
<p>Unfortunately you cannot use the scholarship money to reduce your family contribution. However, there are some contests that call themselves scholarships. They make the check out to you to use as you wish, but must be reported as income for the tax year received. </p>
<p>I don't really have an educated opinion about whether or not you should accept any other scholarships you may get. You may want to check out the stipulations in the scholarship. DO they have to be used for the upcoming year?? I think I remember something about the coca cola scholarships that they could be saved and used something like any time within the next six years. It's probably an isolated case, but it's worth looking into if you get any more scholarships. </p>
<p>I agree with hsmomstef that you should ask to have the cost of the computer and university health insurance included in you COA so that you can use the scholarships you got/may get towards that. </p>
<p>Congratulations on getting a great package. Your parents must be very happy and also proud of the effort you've made to get outside scholarships.</p>
<p>One more question:
Would I report scholarships/grants on my return or my mom's for next year?</p>
<p>Yours. But only the part of your grants/scholarships that exceed tuition/fees/required books. And only if your total income (including the taxable part of grants/scholarships a plus other income) is high enough to require you to file a tax return.</p>
<p>All sorts of tax rules for education here
<a href="http://www.irs.gov/pub/irs-pdf/p970.pdf%5B/url%5D">http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>