If you’re particularly knowledgeable and have some time, I would love it if you could PM me. In the meantime, could anyone give me some insight?
I earned enough scholarship and financial aid to cover my year at a public university (tuition, room/board and a decent reimbursement). From what I understand, I’ll have to pay taxes on the portion of it that didn’t go directly to tuition. However, I’m confused because my school hasn’t offered me any information about this and none of my peers are discussing it. The few times that I did bring it up, everybody just kind of shrugged and said they weren’t sure, leading me to think that I’ve been mislead.
So, do I file my own tax report? I’ll be getting a W-2 from a little job that I do now and again, but it’s not like the university is going to give me one. Do I just file this through my parents’ tax return?
It seems like this is going to negatively effect their tax return (usually around $3000 or more) and my financial aid eligibility. I’m really grateful for the scholarships, etc., I received and I don’t mind paying taxes on them, but I’m really terrified that it will hurt my aid for my sophomore year. (My EFC last year was 0 and my parents made less money this year than the last. If they have to include my “gross income” as part of their “gross income,” I think it might put us in a different tax bracket.)
I have never heard of anyone having to pay taxes on financial aid money, with the exception of state and local taxes for work study money (taken out of paychecks).
Comfortablycurt…you are wrong. Any scholarship or grant money that is not used for qualified educational expenses is considered taxable income for the student. Qualified educational,expenses are tuition, fees, and books.
To the OP. Many schools send a 1098 T to students. This will lost yoir scholarship amounts and also the qualified educational expenses billed by the college (tuition/fees). You add books to that. If your scholarship exceeds the amount of tuition fees books that you paid, it is considered income.
BUT that does not mean that for sure you will owe taxes on the amount. The total of this plus any other job earnings have to be more than a certain amount…about $6000… For taxes to actually need to be paid.
At this point…be patient. You can contact your college bursar’s office to see if they will be mailing you a 1098T or if you can access it online (we did that with one of our kids).
^^Yes, there are portions that you have to file for. This is not my area but it has been writen about here already, so I will look for a link.
Tired, don’t be terrified about this, my student got unchanged financial aid and was in a similar situation. It is never worth being terrified rather than fact finding. Be terrified afterward if you must!
In some cases you school will give you a form for that amount.
You should receive form 1098-T by Jan 31.
How am I wrong? I simply said that I’d never heard of that being the case. I didn’t say what the case was either way.
I’d never heard of filing taxes on financial aid money. Nobody ever mentioned that to me in my financial aid office. I’m guessing this is one of those things that is technically required, but rarely actually done.
It is required…and done…and I don’t think it is rarely done.
You may have never heard of it because perhaps no one in your circle received scholarship,or grant money that exceeds qualified educational expenses.
Yes. If you have taxable scholarships, you would report them on your tax returns, not your parents. However, unless you (as a dependent of your parents) have large taxable scholarships, you may not require to file the tax returns. See http://www.irs.gov/publications/p970/ch01.html and http://www.irs.gov/publications/p501/ar02.html#en_US_2014_publink1000220698
So, like post #2 has said, you should wait for your 1098-T from your school and then determine the amount for taxable scholarships. At that point, if you’re required to file tax returns, you could get free help at VITA program of IRS.
Refer to IRS Publication 970. Go to irs.gov to find it.
The portion of your adjusted gross income that is from taxable scholarships is adjusted out on the FAFSA so that your 2015-2016 EFC isn’t affected by this income.
Here is a clear explanation of what is subject to tax, you can check these amounts against what the school gives you on the 1098T
If the student is a degree candidate, then scholarship and fellowship amounts used for tuition and REQUIRED course-related expenses (e.g., fees, books, supplies, and equipment) are exempt from federal income tax and may be excluded from gross income. Amounts used for living expenses (room and board) and other non-required expenses (computers, travel, etc.) are not exempt.
http://www.finaid.org/scholarships/exemptions.phtml
Comfortably…if a student total income, including these scholarships, is below the theshold for filing, the student does not have to file taxes.
BUT if it is above…the student MUST file federal income taxes. Not an option.
Not only is the excess scholarship amount taxed, it is subject to the ‘kiddie tax’ and taxed on the student’s tax return at the parents’ rate as ‘unearned income’. You need to complete form 8863 and attach it to your (student’s) return. $2000 is exempt, but the rest is taxed at the parents’ rate. I haven’t yet figured out if the student’s standard deduction can be used to offset the tax owed on the Form 8863 (I am pulling the bandaid off slowly…)
In a rather ironic way, schools often do not send the 1098T to students who get the most scholarships and have been paid over the QEE (qualified education expenses) because they are sending the 1098T to assist the parents in possibly claiming the tax credits. If you receive over the QEE, you have no tax credit (unless you declare some of the QEE as taxable so that you can claim the tax credit). However, most school do make the 1098 available online, and you can check there. If you don’t get one, you can use your own figures. My daughter’s bill lists the tuition and fees, the amount of the scholarships, and amount I paid. We kept track of the books purchased.
Don’t you mean Form 8615?
@twoinanddone
Sorry, 8863 is for the credit (the form I’m happy to fill out!)
Oh, I see. I’m grateful to each of you for helping me out. My school is giving me the 1098T form on January 31st, but in the email they announced it in, they only mentioned the possibility for tax credit. It makes me a little upset that the finaid department wouldn’t even bother to send a notice on this matter. Maybe they will later on? Oh well. Many students at my school are on full scholarship/aid like me, so it’s not really a unique circumstance. Why don’t other students know about this? Will they be getting in trouble with the IRS later on?
So, do I just fill out the Form 8615 and then give it to my parents to file on their returns? My 2014 ‘unearned income’ is only slightly less than the amount that went directly to tuition/fees (just about $6000 each). My mom is considering meeting with a tax preparer but it’s a little difficult for us to pay for this kind of stuff.
No. It depends. Form 1098-T reports the tuition you paid so that you can claim educational credit. But form 1098-T also reports scholarships and grants. If part of the scholarships and grants is used for room and board then you need to file tax returns. Don’t blame on your FA office. The FA office has no responsibility to tell you to file tax returns or not. You have to figure out yourself. Also, if you work part-time you may also receive form 1099-MISC (when employers don’t withhold tax, they send you form 1099-MISC so that you pay tax yourself). You must file returns if the value on form 1099-MISC is $600 or more. Welcome to citizenship.
You can use Turbotax online (or offline version) to file tax returns yourself. It will guide you step by step.
It’s not that complicate.
Correction to #16: $400 on 1099-MISC, not $600 - requirement to file returns.
See more requirements for dependent to file returns here:
http://www.irs.gov/pub/irs-pdf/p501.pdf
If you work part time, you could also receive a w2 form for income earned. When you do your taxes, all income has to be included…including that which is scholarship or grant money above and beyond qualified education expenses. If your total dollar amount is very low, you might not have to file.