<p>Refresh my memory: Should income tax be paid on scholarship money which pays for housing/meals?</p>
<p>Yes.</p>
<p>Scholarship and grant money in excess of tuition, fees and required books are taxable. The tax publication is IRS 970</p>
<p><a href="http://www.irs.gov/pub/irs-pdf/p970.pdf%5B/url%5D">http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>
<p>pages 4-6</p>
<p>Yes...you should receive a 1098 from the college that will deal with the amounts.</p>
<p>Just to clarify.....that's on the student's tax form, correct?</p>
<p>You get a 1098T...the student does...and yes, the student pays the taxes. This same 1098T also give you the information you need for parent college tax initiatives too (college tuition deduction or tax credit).</p>
<p>^^The same expenses (tuition/fees) cannot be used for both tax credits (such as the Hope tax credit) and to make the scholarship/grant non taxable. You can only use an expense for one education tax benefit. But you can choose which is the most beneficial to you taxwise (unless a scholarship specifies that it is for a particular expense - for instance if a scholarship says it is for room board then you cannot use tuition and fees to make part of that scholarship tax free).</p>
<p>Thanks. That information above saves me the time searching for it.
I ask because the scholarship is conditioned upon presenting the tax returns showing the 1099 amount as income.
Even though the scholarship explicitly pays for tuition and housing and meals,
it looks like the future 1099T will list the housing and meals that the scholarship(s) paid for as income. I guess we'd better start saving receipts and statements for fees, books, supplies, and off-campus meals.... anything else? travel, parking?... as additional deductions too.</p>
<p>
[quote]
Even though the scholarship explicitly pays for tuition and housing and meals,
it looks like the future 1099T will list the housing and meals that the scholarship(s) paid for as income. I guess we'd better start saving receipts and statements for fees, books, supplies, and off-campus meals.... anything else? travel, parking?... as additional deductions too.
[/quote]
Any portion of the scholarship that is for housing and meals is taxable. Only tuition/fees/required books may be used to reduce the taxable portion of the scholarship. Not on campus housing and meals & definitely not off campus meals, travel, parking. </p>
<p>You can only use qualified education expenses as deductions. To make life more complicated what qualifies as a qualified education expenses varies depending on the particular tax exemption. For instance</p>
<ol>
<li><p>non taxable Scholarships and grants. Only tuition, fees (except for those not allowed - your 1098 will tell you) required books, required supplies.</p></li>
<li><p>Hope tax credit and lifetime learning credit:tuition and fees and required expenses such as books but only if the cost of those fees and books must be paid to the school as a condition of attending the school. Generally that means you cannot claim books as you don't usually *have *to buy them from the school.</p></li>
<li><p>529 account qualified expenses - tuition/fees/books/room and board - either the room and board actually paid to the school or the amount allowed in the COA of the school.</p></li>
</ol>
<p>The link to IRS 970 in post #2 contains the detailed (and, being the IRS, confusing) rules.</p>
<p>The school should send you a 1098 showing tuition and fees. One thing we discovered last year was that certain fees are not allowed by the IRS to be used in calculating the non taxable part of scholarships (even though they are required fees by the school). At my daughters school these were a transportation fee, Athletic fee, health fee, and a fee for the school newspaper (public school - lots of fees)</p>
<p>I keep a spreadsheet with all the expenses and scholarship/grant information to help me keep tack. Then i spend some time trying to figure out which is the best education tax benefit to take.</p>
<p>Could it be argued that lab books (which are only available from the school) are required? (You can't pass the class without completing them.) Supplies like safety goggles? (You can't be in the lab without them.)</p>
<p>What about mandatory housing association fees? Non-refundable housing deposits? Lab fees? Mandatory student association dues?</p>
<p>I believe that costs for all books that are required for your courses (including lab books) are not counted as taxable scholarship amounts.</p>
<p>ALL (read that...ALL) scholarship money that covers ANYTHING (ANYTHING) related to housing and food (room and board) is taxable (that includes housing fees, housing deposits, etc). As Swimcats pointed out...some fees are taxable as well....even if required for the school.</p>