<p>^^ For unearned income, the child pays at the parents’ rate and it can be included in the parents’ return for convenience. The tax paid ends up the same either way, IIRC. Not so for earned income - that is taxed at child’s rate and must be on child’s return. Scholarship income is considered earned.</p>
<p>From IRS publication 970:
“Example 2. Donna and Charles, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year
classes. The college has no policy about how students should obtain these materials, but any student who purchases them from College W’s bookstore will receive a bill directly from the college. Charles bought his books from a friend, so what he paid for them is not a qualified education expense. Donna bought hers at College W’s bookstore. Although Donna paid College W directly for her first-year books and materials, her payment is not a qualified expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution.” </p>
<p>Really the only time books are not taxable are when the school requires them as a condition of enrollment. Some schools include the costs of books in their tution and then provide you the books. Every student MUST purchase the books and they all pay the same amount. Although UA lists books as required, they are not required in the sense that students must purchase them to remain enrolled. Students have the option to not purchase books or where to purchase the books from, so in the eyes of the IRS, those funds are still technically taxable.</p>
<p>But if it happened that you didn’t know that, we’ll say you didn’t hear it from me…</p>
<p>*^^ For unearned income, the child pays at the parents’ rate and it can be included in the parents’ return for convenience. The tax paid ends up the same either way, IIRC. Not so for earned income - that is taxed at child’s rate and must be on child’s return. Scholarship income is considered earned.
*</p>
<p>Well, it’s good that it’s considered to be “earned” so that it’s not taxed at the same rates.</p>
<p>I think that quote from publication 970 is outdated as up until a couple of years ago, textbooks were not considered a qualified expense. UA might word things so that textbooks may be required for enrollment in specific courses, but that requirement is not enforced.</p>
<p>The 1040EZ is a relatively simple form. TurboTax is advertising in the CW that one can take a picture of their W2 with their smartphone, answer a few questions, and be done with their taxes in 10 minutes. </p>
<p>It seems to be debated whether one needs to file a nonresident income tax return with Alabama and/or a resident income tax return in their home state. Alabama’s nonresident tax forms cannot be filed electronically and refunds are by check sometime in March or April for those who file now.</p>
<p>Here is what UAB says about state taxes on scholarships:</p>
<p>Taxability – State of Alabama</p>
<p>The State of Alabama currently excludes scholarships and fellowships from taxation in their entirety. However, in order to qualify for exclusion from taxable income, it must be a true scholarship/fellowship with absolutely no services required in exchange.</p>
<p>State of Alabama income tax regulations specify that:</p>
<pre><code>“Gross income does not include a fellowship or grant that is an outright gift with no obligation on the part of the recipient. Payments to an individual as a scholarship at an educational institution or as a fellowship grant are excluded from the gross income of the student to the extent that services are not required of the student in order to receive the payments…If there is a condition that a person must teach or enter into employment, payments are not gifts…Payments for teaching, research, or other services in the nature of part time employment required as a condition to receiving the scholarship or fellowship grant are not exempt and should be included in gross income.”
</code></pre>
<p>Because the State of Alabama excludes scholarships/fellowships from the individual’s taxable income, there is no withholding of State income taxes from scholarship/fellowship payments and these payments are not reported to the State of Alabama.</p>
<p>[UAB</a> Financial Affairs - S/F Alabama](<a href=“Financial Affairs | UAB”>Financial Affairs | UAB)</p>
<p>So, for others who have the NMF scholarship- does housing show up on your 1098-T or the iPad? My D’s form just give a scholarship amount of $26,860 and tuition and fees are close to that. Who should we contact if the 1098-T is incorrect?</p>
<p>Linnylu – Here is what I learned when I researched the same question last year. Standard cavaet applies here, you should determine the accuracy of all tax information yourself by your own research or through consultation with a qualified tax professional.</p>
<p>Form 1098T is used for reporting qualified education expenses for the Hope and Lifetime Learning credit/deduction. Since housing isn’t a qualified education expense, it isn’t reported on Form 1098T – either on the expense side or the scholarship side. Scholarships that aren’t compensation for work and aren’t for qualified expenses don’t have to be reported by the educational institution to the IRS – though those scholarships are taxable income to the recipient and need to be included on the tax return if the student’s income exceeds the filing threshold. </p>
<p>Last year, I printed my daughter’s account statement from myBama as backup for the amount we reported on her taxes as received in housing scholarships and priced out a similarly configured computer to the one she received for National Merit. Since she can be claimed as a dependent on our tax return, she didn’t receive her personal exemption, but was able to take the standard deduction and ended up paying a small amount of tax. </p>
<p>Some people might take a more aggressive tax position and wouldn’t claim the child as a dependent on the parent’s tax return – particularly if they are subject to the loss of personal exemptions through the AMT as we are – and would have the child check that she cannot be claimed as a dependent, which could eliminate the tax altogether once the personal exemption and standard deduction are taken into account, but since scholarships aren’t considered “self support” we didn’t feel comfortable going that direction.</p>
<p>Thanks so much payingforcollegeX4. Your post is very helpful and now I know what to give our accountant.</p>
<p>What amount did you use for the housing scholarship - the cost of the super suites or the cost of the most inexpensive dorm room?</p>
<p>how about the cost of the room that your child lives in? that makes sense.</p>
<p>Bumping this – Even after reading all, I am confused. DS is a NMF scholar. I understand he must claim the housing and iPad value as income. I understand that this is not on the 1098T. Here is where I get confused – 2013 NMF only receive 1 year of housing. In order to reduce his tax liablity, can he claim only 1st semester of housing value (4,400) as 2013 income and then the second semester as 2014? </p>
<p>My initial thought was yes, but the 1098T has both semesters and I am concerned that I need to follow that same pattern.</p>
<p>Amounts paid in 2013 for a term beginning in 2014 are normally claimed on ones 2013 taxes. They could be claimed on ones 2014 taxes, but it’s up to the taxpayer to decide if they want to do that.</p>
<p>I highly recommend students file their own tax return. Numerous free filing programs exist, are very easy to use, and can handle some complicated tax issues. For example, the programs I’ve used do allow one to file a 1040/1040A and make any extra tax payments via EFT. It’s also possible for almost anyone to complete their taxes online and eFile for free without using software. Refunds via direct deposit (EFT) are typically taking 2-3 weeks.</p>
<p>For those earning taxable income in Alabama, the state’s not currently allowing form 40NR to be completed online and has no ETA on when that might be possible. It’s very easy to use the filliable PDF and mail it in, knowing that ones refund check might not arrive until late April.</p>
<p>“What amount did you use for the housing scholarship - the cost of the super suites or the cost of the most inexpensive dorm room?”</p>
<p>We were told that it’s not the amount of the super suites, it’s the amount of the housing scholarship which is for a standard double. </p>
<p>M2CK – That is a big game changer. I was using the amount of the dorm he actually resides in. The reason I wanted to only claim Fall Semester housing is because he is being slammed on taxes now that the housing scholarship is being taxed at our rate as his “unearned income” vs. years past when it was the student’s “earned income.”</p>
<p>I would be very careful with this. The scholarships (including housing) are shown on the student’s MyBama page. Log in to MyBama, then click on the “student” tab, then “student services” -> “student receivables” -> “view your account” -> then enter the semester. My daughter’s scholarship awards and costs clearly show $4,400 per semester for housing. (the cost of the super suites)
That is what we showed on her taxable income for the year for housing ($8,800). That amount is not included on the 1098t.
Who gave you that information, M2CK? I would love to claim the lower amount for her too.</p>
<p>FortunateDad – I understand you put both semesters as taxable income. What is your opinion of only listing Fall 2013 and then on 2014 taxes listing Spring 2014? Once I add the housing, iPad, Engineering, etc the “unearned” income tax is killing him. We did not realize the federal tax changes and he only planned on the “earned income” and being taxed at approx 10%.</p>
<p>Hi, Longhaul… If I’m not mistaken, they award the Spring scholarships and apply them before the end of the calendar year. I think the various other scholarships like tuition that are listed on the 1098t are that way too, but I will have to check. That way, both Fall and Spring would be included in the taxable total. I will see if I can find out for sure and get back later.</p>
<p>I’m so confused. I am using TurboTax to do my son’s taxes and I can’t figure out where I would even enter this as income. They asked about the 1098-T in the deductions section, but none of the income categories seems to apply for listing the scholarship income. And do I need to worry about the difference on the 1098-T between the amount of the scholarship and the amount billed? That difference is less than the housing scholarship, NMF stipend, engineering scholarship, etc. (it’s only about $2000) For some reason I thought that the difference on the 1098-T was the amount that would be income - apparently that’s wrong? Arrggghhhh, help!</p>
<p>OK, so using his account statement on myBama, I came up with $40,307 as the total scholarship money awarded for both semesters, and $27,911 as the total amount of tuition and fees charged for both semesters (not including any room and board or miscellaneous charges). So the difference is taxable?? Yikes! It looks like I can also deduct books purchased for classes though, is that right? </p>
<p>I still have no idea how to do it on TurboTax, but I will figure that out. I just want to make sure I am using the right numbers.</p>
<p>Adding another question, when filing my son’s taxes (I used TaxACT online) it was asking for my (the parent’s) tax info to tax the scholarships at MY tax levels (which are quite a bit higher than my son’s), using form 8615. This doesn’t seem right, as it would more than double the amount he would have to pay. Anyone else having similar issues?</p>