You may also want to consider that your food costs and some amount of your home utilities will be less with a child away at college. If your daughter takes a car to school with her ( highly NOT recommended freshman year) then insurance costs could be higher or they will be lower if she has no car and you can take her off.
Did she not end up applying to UVA as her school’s Jefferson scholar nominee? I was curious as to their award even if she did not win the scholarship (wanted to see how much they offer loans vs. grants to out of state applicants since they tout being one of two public schools that are 100% meets need).
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@hokiemama24 the family didn’t have enough financial need with one in college to bring the cost within their price point.
The vast majority of outside scholarships have a need component, and this family was not low income.
@lkg4answers this student has merit awards that exceed the COA at South Carolina by $9000 a year. No outside scholarships needed.
The schools where need based aid came into the picture (Princeton, JHU, and UVA if need based was awarded) would have reduced this students need based aid if any outside scholarships had been received.
South Carolina allows stacking of their merit awards. None of the SC awards were federally funded aid…all school money. The college can award any amount they feel like of their own money.
The perks to the McNair are excellent. It’s not just about the money. These McNair Scholars are treated very well.
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@thumper1 Thank you, yes I recall that now too, I just thought OP said she was applying regardless because she was obligated as her schools nominee for that award. And I was looking forward to seeing how the aid looked as a public school that claims meets 100% need for an out of state applicant (even though OP’s EFC with one student was higher than he could pay, I thought it was still lower than UVA’s COA so UVA should have offered something and I was just curious if it was going to be all loans). It wasn’t on OP’s list of 23 schools so I just wanted to check back!
This is a minor point, but: to be fair, the merit awards exceed the tuition, room and board by $9000 a year. The actual COA technically includes books, travel, and misc expenses, and SC projects those costs per year to be roughly $5500. Still an amazing deal, and very much like the Benacquisto scholarships in Florida.
Yes, you are right…it’s billable costs that have the $9000 surplus. Regardless…it’s an excellent excellent honor to be selected as a McNair Scholar.
I really hope this young woman has a great experience there.
Yes, but the standard deduction available for a tax dependent is based on a specific formula (it’s not the flat $12,400 for single filers and $24,800 for MFJ that is being used for 2020). What will really help here is that taxable scholarships are considered earned income when calculating a tax dependent’s standard deduction.
Haven’t researched it but at what point does all this aid cause the student to have enough income as for the OP not to be able to claim her as a dependent. The rule is I believe 50% of her support. 9 months in college and 3 months over the summer at home doesn’t seem to make the 50% threshold.
Curious, why wouldn’t she file her taxes as independent? The family won’t be paying any educational expenses or room/board (living expenses) for more than half the year.
Scholarships received by a student are not included in total support when working through the Support Test in determining eligibility to be claimed as a dependent by another taxpayer.
It may still be advantageous to OP for his D to declare residency in South Carolina rather than California in order to avoid state taxes, since the standard deduction for CA taxes is much lower and state kiddie taxes may then be payable on a significant amount of the room and board scholarship.
Not living with the parent for more than half the year is sufficient to lose the $500 dependent tax credit in 2021, but the cost of CA kiddie taxes may be more than that (probably 9.3% on an extra ~$7600). It doesn’t avoid the “more than 50% support” test to avoid kiddie tax (and if parents are providing health insurance etc then they may still be providing that). But some other benefits (like the recent $1200 stimulus check) are not necessarily subject to that test.
If she wants to vote in South Carolina, she needs to be prepared with an accepted form of photo ID: https://www.scvotes.org/node/235
You all on this particular thread seem very in the know about scholarships. Question for you or @KevinFromOC --our daughter has a full ride at the college she is going to but has won national, state and local outside scholarships. How does she apply those to her overall financial picture?
I don’t understand the suggestions for the daughter to declare residency in SC. Kids go out of state all the time to college, whether they have scholarships or not, and still most undergraduates would maintain their initial residency of their parents during college. All this talk now about tax implications, residency, seems curious. The goal has been met-college at or under budget ( and in this case, well under budget). If there are some taxes that may need to be paid, not sure what the big deal is . This family has income and assets. Congratulations on a great outcome! Hope your daughter loves her time at college!
Temporary absences due to a dependent child being away at school during the year does not eliminate the $500 dependent credit. Also, the full $9000 is not taxable in CA – it is reduced by any amounts paid for books or required supplies for school, and then further by $2100. This amount is likely to be less than $7600. The remaining amount may be taxed at around 9.3% In any event, I’m sure OP is going to have his accountant advise him as to what is best for his situation.
Congratulations, @KevinFromOC’s D20! Best of luck for the next four years!
Being away at school is a “temporary absence” and does not count against the dependent when the Residency Test is considered for dependent eligibility requirements.
Yes, but if your D demonstrates her intent to reside in South Carolina (registering to vote, getting a drivers license, not coming back to California for the summer, etc.) then the absences would be more than “temporary”. It may or may not be worth the hassle from your point of view, but it is at least worth considering for a student from CA.
The scholarship is $9000 over billed costs. The taxable amount will therefore likely be at least $20000 once room and board is added on so even with a $12000 standard deduction a meaningful amount of taxes will be due. It is important to do some tax planning in advance.
The IRS for tax purposes and the various state governments for legal resident purposes come at the definition of “residency” from different directions.
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The scholarship is $9000 over billed costs. The taxable amount will therefore likely be at least $20000 once room and board is added on so even with a $12000 standard deduction a meaningful amount of taxes will be due. It is important to do some tax planning in advance.
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Ah, yes, haste makes waste – I had the $9K on the brain, and was thinking of that as the taxable amount. But ultimately it was my point, and I think we agree, that OP should be consulting his accountant. Luckily, his daugher’s awards are enough that they should be able to set aside enough for taxes. In any event, the first year will only involve half the award. They have time to plan for dealing with the full award when tax time for 2021 comes around.
My daughter was a Florida resident (as was I) when she started school. She stayed a Florida resident (DL, voting registration) because it was a better tax deal for her; Florida has no state income tax.