<p>In looking at the tax ramification of some scholarships, anything above and beyond tuition is taxable; therefore, your student COULD take their deduction on their personal tax return, if the scholarships are more than the parent is providing. If you do this, how does it affect financial aid? Especially for grad school?</p>
<p>Any one know?</p>
<p>Whoa, there. You are mixing a lot of things here. First of all anythng above and beyond tuition is not always taxable. There are some expenses that can also be met with these scholarships such as books, fees, supplies, etc. Look carefully at the list. Also independent vs dependent students have to fit very precise definitions for financial aid purposes, but the area is grayer when it comes to tax returns. Usually kids are listed as dependents on the parents tax returns as it is usually advantageous tax wise until the kids earn the statutory limits in income. But if you can't get the dependent exemptions because your income is too high, it would be wiser to have the kid take himself as a dependent. For financial aid, the numbers are taken off of the kids return for the part the kid fillls out on the FAFSA, and correspondingly for the parent. For undergrad, basically any asset the kid is holding at the end of the year is a whammy as it is assessed 35% rather than at 5.6% as a family asset. Otherwise I don't see much difference in how the income is assessed--you might want to do the numbers both ways and run it. </p>
<p>Grad school is a whole different story. Most of the time, parents do not pay officially for grad school. There are often grants and teaching stipends given along with loans. Though the grad school have tried to get a parent's contribution, they have been largely unsuccessful at this. I know a number of parents who simply write a letter refusing to be tapped for grad school programs.</p>
<p>I am trying to determine this as we approach tax returns, my DD just having received a fairly substantial 1098. If the school sends the 1098, then those funds will be taxable, I assume. I suppose all the books & supplies can be deducted, if she itemizes. Because the amount is fairly high and I believe includes work study, then, I am thinking the amount may be very very close in terms of 50% support. Especially as there is an off-campus job W2 forthcoming.</p>
<p>So, if she could be 50% or more self-supporting and claim herself, would that help for something, FAFSA or Grad school- she is 3rd year, so if 2004 were the first year she claimed independence, that would happen in time for grad school fin aid- I know it used to include your parents for law & medical school not sure how it is now, but we're trying to think ahaead & like undergrad, not miss an opportunity for consideration.</p>
<p>Not much in the way of financial aid for grad/prof students. Almost all loans.</p>
<p>Jamimom: </p>
<p>As Xiggi pointed out in a thread earlier, its not income, but 'support' is a key the qualifying test for dependency, not necessarily income (since tuition is not counted as income), at least up until age 24 as long as the child is a FT student. you might check out Sybbie's original post on the third page of the parent thread.</p>
<p>Somemom: your analysis appears on the right track. But, you need to run the numbers (I know, a pain), because the tax deduction itself might be worth a lot more to you if your tax bracket is much higher than your D's. On the other hand, as noted by Jamimom, any taxes paid by your D on her return are more valuable for fafsa calculations.</p>
<p>Most PhD programs provide 100% support. If not they don't want you that much.</p>