<p>I know that scholarships and grants that are used for anything other than tuition and fees (books too?) are taxable.
If Federal financial aid (Pell and other grants) are used for room and board - is that taxable income for the student?</p>
<p>Yes…any aid, other than tuition and fees, is taxable. Including federal aid. What truly irked me when this was disclosed…athletic scholarships are not taxed.</p>
<p>Momray - I don’t know who told you that about athletic scholarships but I don’t believe it is correct. Athletic scholarships have to meet exactly the same criteria as any other scholarships to be tax free. From IRS 970</p>
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<p>The requirements were the list of what made a scholarship tax free and what made it taxable ie room and board is taxable etc…</p>
<p>Pell and other federal grants are treated the same as sccholarships for tax purposes.</p>
<p>Any “free” money (scholarships & grants) in excess of tuition and fees are taxable. Your school will send a 1098T for tax purposes — parents, this may be in your student’s web portal, so you might need to ask about it. We don’t send anything snail mail.</p>
<p>Please refer to [Internal</a> Revenue Service](<a href=“http://www.irs.gov%5DInternal”>http://www.irs.gov) for further information. I actually had a tax preparer get upset with me this year because I said a student had to file an amended return including her taxable scholarships in order to get aid last year (it was a conflicting information thing, which had to be resolved in order to be eligible for aid - doesn’t usually come up, but did in this case due to the circumstances). The tax preparer seemed to think that “no one claims it on taxes, anyway.” Great advice (not).</p>
<p>Just to be clear, so I don’t mess up :-)</p>
<p>I understand you to mean:</p>
<p>Any student loans are not taxable ie: Stafford sub, Perkins sub.</p>
<p>Any grants that are lower than the amount of tuition are not taxable.</p>
<p>And any work study earnings are not taxable.</p>
<p>And if all of the above are true (not taxable) does the student need to file a tax return?</p>
<p>Do I have this correct?</p>
<p>Thanks so much.</p>
<p>Work study earnings are taxable income. They are taxable for federal taxes ans some State taxes. They do not incur FICA.</p>
<p>Whether the student is required to file will depend on total income and the type of income (the cut offs are lower when there is unearned income). If the student has enough taxable income to be required to file then the student must file. If the student did not make enough taxable income to be required to file but had taxes deducted from earned income (such as work study or other job) then they should file to get the tax refunded.</p>
<p>Thanks so much, that helps a lot.</p>
<p>Why don’t they take tax out of them when distributed to the student? Sounds like a pain! Are they taxable to the student (they fill out a tax return) or does that information go on the parent’s tax return? (I think I may have seen a spot on our return for that). They don’t even take out Social Security, Medicare or State Disability taxes!</p>
<p>This can be confusing the first time around, so thank you for your help :-)</p>
<p>The Social Security and Medicare are the FICA taxes. Workstudy income does not incur FICA taxes.</p>
<p>My daughter’s school does take out state and federal taxes. It probably depends on how the student completes their W4. Perhaps the way your student completed the W4 meant they did not take out any taxes.</p>
<p>If the students only income is earned income then the cut off to be required to file is $5700. If their income was below $5700 they are not required to file. If they did not have any taxes deducted (are you sure they did not) then there is no reason to file. If they did then they should file their own tax return to get it refunded. (If they have any unearned income the cut off may be different).</p>
<p>Thanks! That clears it up :-)</p>
<p>No, there were absolutely no taxes taken out of the pay, however the income will be below the $5700 amount. We should be good.</p>
<p>Daisy, you may be aware, but I will point out that work study earnings are not counted against a student in the EFC formula. The money has to be reported on the FAFSA as wages earned, even if the student doesn’t have to file taxes. In another place on the FAFSA, though, there is a question about earnings from work study. That is because those earnings will be removed in the formula. So if a student’s only earnings were $3000 work study, and if taxes aren’t filed, $3000 is reported as earnings & $3000 is reported as earnings from work study.</p>
<p>I am confused about one situation. Say the taxable portion of scholarship is $3000 (excluding tuition,fee, books) and I claimed my daughter as dependent. Will she need to file a return? It depends on scholarship is considered as earned income or unearned income, and I can’t find the answer. Even if she wants to file a return, using 1040EZ, then she needs to pay tax. If she uses 1040A or 1040, even she has no exemption, but the standard deduction is already higher than $3000 for a single.</p>
<p>Which way is correct?</p>
<p>It’s earned income for federal. Look at earned income on page 3 here:</p>
<p><a href=“http://www.irs.gov/pub/irs-pdf/p501.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p501.pdf</a></p>
<p>State could be different, my state considers it unearned.</p>
<p>Kelsmom - is it common to report the full year tuition on the 1098, not just the first semester of freshman year? It seems to make the process all the more confusing, or, more to the point it makes the 1098 useless for accurate reporting purposes the freshman year.</p>
<p>^Yes it is, my D1s school gives tuition by the school year but scholarships by the calendar year, likely due to when these things show up on their accounts. Here is a past discussion and how I dealt with it:</p>
<p><a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/875081-scholarships-taxable.html[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/875081-scholarships-taxable.html</a></p>
<p>Schools can do it either way. One of my kids’ schools does it one way, the other kid’s school does it the other way. I am not sure what the advantage is to the school to do it one way or the other; that is a decision made by folks much higher on the food chain than I!</p>
<p>^^I always assumed that it was due to schools using different billing programs and thus making spring tuition charges and FA payments happen either before or after the new year. </p>
<p>For instance, when I look at D1s school billing, it makes sense why they report the numbers like they do on the 1098T. Although they bill tuition for spring semester in Nov, FA grants are not applied to that bill until Feb. So, for fr year, both fall and spring tuition charges were reported in box 2, but only fall FA grants were reported in box 5 because the spring FA would not be released until the next calendar year. And for the next three years, this offset continues…</p>