How much will I pay in taxes? Is this correct?

Paying for College
1

For the 2015 tax year, I’ll have $8365 in scholarships/grants above tuition+mandatory fees (spring 2015 + fall 2015 semesters).

Assuming I earn about $2500 working this summer, I’ll have a total of $10,865 in taxable income.

However, I’ll have about $1800 in other qualified expenses: a combination of books + lab fees (spring 2015 + fall 2015 semesters).

Subtracting this amount leaves me with $9065 in taxable income.

Finally, subtracting the $6300 deduction for individual tax payers leaves me with $2765 in taxable income.

This would fall under the 10% tax bracket; thus, I’d pay about $277 in taxes. Did I calculate this correctly?

Source: http://www.forbes.com/sites/kellyphillipserb/2014/10/30/irs-announces-2015-tax-brackets-standard-deduction-amounts-and-more/

Ps: I understand what’s taxable vs. nontaxable. Just trying to figure out how much I have to pay from the taxable. Thanks.

2

If you’re a dependent (your parents claim your exemption), you may have worry about F8615 and pay more than $277 in taxes.

3

Yes, read about form 8615, the kiddie tax.

http://www.irs.gov/pub/irs-pdf/i8615.pdf

You will have to pay tax on some of the $2765 at your parent’s tax rate, not your 10% tax rate.

4

Ahh I seee. 15% not a big diff

So I still get the $6300 deduction, right?

5

Yes, you get the $6300 standard deduction.

6

Thanks!

7

Don’t forget abut state income tax too, unless you are in Washington, Nevada, Texas, Florida.

8

^ Hmm soo after a state deduction of about $4k, I’d have a $5k state-taxable income. That would leave me with a 1% single-filer rate and a parent rate of 4% for CA state taxes…

9

So I’d be looking at roughly $400-500 total in taxes.

If parents get full refunds, does it affect how much I pay?

10

No, but generally the parent will give the kid that part of the refund relating to the exemption to pay the kiddie tax increase.

11

@annoyingdad - please chime in, since I am not sure here!

I keep thinking I understand this situation, but I guess I am still confused!

I thought that only the first $2000 of unearned income is exempt from kiddie tax.

If the OP has $8365 in scholarships/grants(unearned income) minus1800 additional qualified expenses= $6565 unearned income

OP, do your parents pay $0 in federal taxes? If their rate is lower than yours, you would not have to pay kiddie tax.

Since OP has an additional $1800 in QEE out of pocket and probably a loan and Pell grant if low income, can’t the amount of those additional QEE expenses be shifted to income and that amount considered to be applied toward tuition expenses rather than room and board and other non-QEE expenses as outlined in the IRS Fact Sheet entitled Interaction of Pell Grants and Tax Credits: Students may be foregoing Tax Benefits by Mistake? Link below:

http://www.irs.gov/pub/irs-utl/Pell%20AOTC%204%20pager.pdf

12

Lilliana, the reason you get the $6300 federal standard deduction is because the IRS treats taxable scholarships/grants as earned income for the purposes of filing requirements and the standard deduction. My state treats them as unearned income for those purposes so my son didn’t get the full state standard deduction. His standard deduction for our state was earned income(not including taxable scholarships/grants) + 300. So he always wound up owing a little more in state tax than federal tax. I don’t know whether CA treats this as earned or unearned income for the purpose of the state standard deduction.

13

Don’t forgot to check if it is worth it to declare additional part of your scholarship as taxable so that your parents can claim the AOC. You will need run the numbers to see what amount makes sense.

14

@HRSMom Ahh yes, I talked to my parents about that

@mamag2855 I added my estimated work earnings for this summer to the unearned income (scholarships/grants). I know they’ll be taxed differently, but I was just trying to estimate. I’m not sure I can shift the scholarships for tuition; I have a full tuition scholarship not included in these numbers…Having some of the other scholarships be untaxed will only make part of the tuition award taxed, right?

@annoyingdad Ahh I see…

I’m having a hard time finding the info straight from the CA gov. but…

http://www.morganstanleyfa.com/public/projectfiles/b5ca6d9c-fdc8-4956-8154-9035fd8cbbce.pdf

So for CA tax purposes, the standard deduction of $4k would only be for earned income? Zero taxes on wages but more on scholarships/grants?

@noname87 Hmm true, the credit could be larger than the tax amount :slight_smile:

15

You need to determine whether the scholarship is specifically identified by the college as being for tuition, or if is a scholarship for $X that just happens to be equal to the amount billed for tuition.

If it is for tuition, then you can’t treat it as covering some other expense.

16

@happymomof1 Yes, it’s specifically for tuition, which is why I didn’t include it the calculations lol. It’s not a set amount, it fluctuates to whatever the value of tuition is for the yr.

17

Terrific! You won’t have to worry about tuition increases each year. I also think it’s wonderful that you are so far ahead of the game on the tax issues!

18

@happymomof1 Yeah, it’s nice; I just forget tuition exists. :slight_smile: Still gotta be conscious about other expenses though haha