<p>Technically, any scholarship or grant that covers more than tuition, fees & supplies (i.e. grants that cover housing costs) is taxable. (Here is the official IRS statement: Tax</a> Topics - Topic 421 Scholarship and Fellowship Grants.) Some college officials have told me that very few people actually have to pay taxes on their aid. I just thought I'd check in with the College Confidential community to see if that is true. Have you ever had to deal with the IRS over financial aid? If so, is there any advice you would like to pass on to others about this?
Thanks,<br>
Kim</p>
<p>You should ask IRS. Nobody in this forum will tell you it’s ok to dodge taxes.</p>
<p>I just finished an audit from my state over educational credits. They do check your 1098-T; so my advice is always keep the supporting tax documents.</p>
<p>Yes, my son has paid taxes on scholarships in excess of QEE every year. Many have posted here that their sons/daughters/selves have also had to. The finaid office may have said few have to pay because few get scholarships/grants in excess of QEE. Also, no taxes are due/don’t have to file for a student who can be claimed as a dependent on someone elses return(parents) if total taxable income is less than 6100 for 2013, 5950 last year. IRS Pub 970 is the reference for educational tax matters and is referred to frequently here on CC. My only advice, if you need to file and/or pay tax because of scholarships/grants in excess of QEE, do so. Don’t do so at your own risk.</p>
<p>Edit: I thought your username rang a bell. Looking at your other posts you are from Money Magazine. If I had known that I wouldn’t have taken the time to reply thinking I was helping a real student/parent. It would be helpful if you would identify yourself in each post.</p>
<p>Few people “have to pay taxes on their aid” because few people get enough aid to require it. A student must be receiving institutional grants or scholarships that are in excess of required costs, and the excess when added to student earnings must exceed the standard deduction for the student.</p>
<p>Even students receiving large need-based aid packages will rarely have grants/scholarships this large. Most will have a significant portion covered by loans, Pell, or other types of aid that are not taxable income.</p>
<p>This tax usually effects students who have received a full ride or near full ride merit scholarship.</p>
<p>Students from New York state will get Federal Pell gant & NYS TAP to attend schools in NYS. So, it’s common that the students attending community colleges would have more scholarships than the tuition, fees & supplies; however, I don’t know how those students reporting the excess scholarships.</p>
<p>My kids had to pay state income taxes but not Federal income taxes on their excess “scholarships”</p>
<p>We do because of some investment income for D and summer work plus she gets full coverage of room and board and that number (value of around 10K/yr) is taxable. If you don’t have full scholarships you might not earn enough to owe any taxes. Depends on how much you earn. It is a pain since no tax is withheld but having a full ride is certainly worth the taxes!</p>
<p>Few people do, because few get fin aid packages in grants sufficient to cause a taxable event. Most fin aid has loans and work study in there. Students also can make up to $6K or so a year before having to pay penny one in federal taxes.</p>
<p>I’ve often mentioned how deflated we felt when one of our kids got a $30K+ scholarship. Sounded like a lot. Well, it doesnt even cover the tution. Since big awards like that are rare and school meeting full need are also rare, it makes sense that not many kids are going to get enough money that they have to pay any taxes. I daresay, also that this is not a niche the IRS particularly sniffs out , and some who should have filed may not have.</p>
<p>Yes, anyone who gets more financial grant aid (not loans) than tuition could be eligible for tax. It is most likely to happen at a public school with high priced housing, good aid and a low EFC. Like say, the Blue & Gold at a UC covers tuition, then you get extra grant aid toward housing, taxable.</p>
<p>We paid taxes on S1’s scholarships. He had a full ride… NROTC scholarship paid for tuition/fees/books Two merit scholarships from the university combined to pay for his room and board. We paid tax on the two university merit aid scholarships. He also got a monthly stipend from the Navy. Can’t remember if that was taxed or not. He graduated four years ago so I’m kinda fuzzy on the details.</p>
<p>Yes. The combination of my daughter’s good merit aid plus some need based grants exceeded her qualified education expenses by quite a bit, plus she worked holidays and had some earnings. She ended up with a fair bit of tax to pay on her scholarships. (we paid it for her).</p>
<p>
Exactly her situation.</p>
<p>Yes, D1 paid taxes on both merit and need based FA from a couple of very generous schools. However, I’m much rather pay the taxes on grants than not get them and pay out of pocket or take loans, which I’m doing now for D2. ;)</p>
<p>Sorry for the confusion. I certainly didn’t mean to hide anything from anybody. As you note, my profile clearly states my connection to Money magazine. I will be extra careful to identify myself in my professional capacity in the future.
Kim Clark
Money magazine</p>