<p>Details:
I'm 21, and independent, I have a job (earned $6000 on W2), I receive no aid whatsoever from parents (nor do I live with them) and they're unemployed anyway, so they don't file taxes and can't claim me anyway.
The 1098-T form I got from my university says that for the past year I was billed $43k for tuition and fees, and received $60k in scholarships and grants. Almost all of the extra money went to pay room and board, of course.
Now turbo tax says I have to pay $950 in federal taxes and $850 in state taxes, which seems like quite a lot to me considering most of the extra income didn't go to my pockets, also last year I still managed to get a refund with a similar situation (more scholarship money than tuition and fees) because I qualified for the American Opportunity Tax Credit, but now it seems I don't qualify for it anymore according to turbo tax (I've claimed it for two years now).</p>
<p>Am I missing anything or is that really what I have to pay?</p>
<p>It did go into your pockets, figuratively speaking, and then it went right back out to pay your room and board. You got a direct benefit from that “extra” money, and it didn’t pay for qualified education expenses, so you have to pay tax on it.</p>
Anyone with your income is paying at least that much. Assuming your filing status is Single:
Your Federal taxable income: $6,000+$17,000-$6,100-$3,900=$13000
Your Federal income tax: $892.5+15%($13,000-$8,925)=$1,503.75
So, if
your Federal income tax withholding would be $553.7</p>
<p>Turbotax is correct. You need to pay for anything above qualified expenses. Any required supplies, such as books, may be added to the qualified expenses of tuition and required fees typically on the 1099T. </p>
<p>Put it in perspective and appreciate the fact that you are paying less than 2K in taxes and not the 60K for your education. You have wonderful grants and assistance that allow you an education. Be grateful.</p>
<p>But yes, it is annoying that your university didn’t warn you of this up front. You might have been able to set aside some money for the taxes had you known in advance.</p>
<p>Regarding your AOTC question. Did you use TurboTax the last two years? With $17k of scholarships/grants above tuition/fees it’s hard to see how you would have had to pay anything out of pocket. I think $17k would cover R&B and books at any school in the country. It may be possible to shift some of your scholarships grants from QEE to non-QEE, declare that amount as additional taxable scholarships/grants and take the AOTC on that amount. But you had to have actually paid something toward your education out of pocket or from loans. Perhaps you incorrectly took the AOTC the last 2 years.</p>
<p>Nope, I have cleared everything out. The part confusing me was that the 1098-T was not telling me the amount of loans that were also part of the financial aid but for some reason it did last year. Turns out my loans were reduced this year and so I didn’t get enough to qualify for the AOTC… Oh well, it’s not a big deal. My only gripe is merely not being warned about it by my college, all that money went to room and board and flight tickets, now I have to figure out how to pay for this tax bill. </p>
<p>OP, it is not the university’s job to talk to it’s students about taxes. Taxes are just one of many things the university won’t warn you about. </p>
<p>It may not be formally one of the jobs of the college/university scholarship office to inform students about the tax consequences of the scholarships (and I would not be surprised if many of those same scholarship officers are ignorant about the taxes), but that does not change the simple fact that those people do bear a moral responsibility for providing this information to students who need it. Perhaps if the OP and other students similarly affected would raise the issue with the scholarship offices, things might change.</p>
<p>I don’t believe it is one of the moral responsibilities of the college university to discuss tax implications with their students. It is the moral responsibility of the taxpayer who receives income of any sort to understand the tax implications. Of course the new tax payer may not know the tax implications of income, but that doesn’t take away the responsibility of understanding your tax situation. I certainly don’t want to see my college fees increase because a group of students/families don’t understand the tax implications of college grants. </p>
<p>GTalum - Just exactly how long would it take the scholarship office to tell the one or two students each year who get this kind of ginormous aid package that 1) the room and board portion is taxable, so 2) they will have to file a federal return each year, and 3) they need to be attentive so that they have approximately $X available come April 15? Not long at all. That two minute conversation, probably accompanied by a flyer about the tax situation would cost pennies. Certainly not enough to cause your own college fees to go up!</p>
<p>Colleges don’t give tax advice for the same reason they don’t give legal advice -they aren’t authorized to do so. They can, and should, tell students to consult a tax adviser if they have any questions. Colleges are also dispersing funds from other sources and don’t want to be responsible for how those funds are used and the tax consequences.</p>
<p>Yes, I think they should put a statement on the ‘awards acceptance’ page saying ‘Awards may be taxable to the student. Please check with a tax adviser.’ </p>