<p>We received a 1098 tax form from my son's college today. It stated the amount of scholarship dollars he received in 2010 (a fairly considerable amount). He is a freshman so this is the first time we have received one of these. The form was in his name. Are there any tax consequences? Or anything he or we could owe as a result?</p>
<p>He must pay tax on any scholarship that exceeds tuition and legitimate expenses like books. Room and board are not considerd legitimate expenses by the IRS. So if his tuition is higher than his scholarship and you have receipts for books, he’ll be okay.</p>
<p>Yes, there can be tax consequences. Grants (including need based grants such as the Pell) and scholarships that exceed tuition, fees, and required books are taxable income. The income is the student’s income, not the parents. Whether there will actually be taxes owed depends on the amounts and the students other income if any. For 2010 the standard deduction for a single person is $5700 for earned income (taxable scholarships are treated as earned income for tax purposes). Students with unearned income may have different (lower) filing cut offs.</p>
<p>The tax publication relating to education tax benefits is IRS 970.</p>
<p>So I guess my son’s $500 scholarship isn’t an issue, lol.</p>
<p>Wait. So. I got a scholarship from UW-Madison of about $10,000 last semester. About half of that went to tuition. The other half I used for room and board and books and other crap. Are you saying I have to pay tax on $5000? I also have a work-study job, made $800, but as far as I’m aware that doesn’t count as taxable income, that’s the benefit of the work-study thing.</p>
<p>I just don’t know how I’d be expected to pay tax on $5000…I mean, the money was given to me BECAUSE of my extreme poverty. I have literally no money with which to pay this.</p>
<p>Get your real numbers in hand, RoxSox. Get a copy of IRS Bulletin 970. Get exact numbers of how much did you receive, how much was tuition and how much you spent on books and other expenses allowed by 970, etc. </p>
<p>Add taxable amounts to other taxable income you received. You’ll probably find that after you take out the standard deduction, you most likely won’t have to pay any tax at all.</p>
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<p>Is this serious? Obviously you have money to pay it with; whatever the tax is will be a percentage of the money you got in the first place. Of course, in your tax bracket you won’t be paying anything.</p>
<p>When you receive some cash, you need to find out the tax consequences first.</p>
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Actually Work study is taxable income for federal taxes (and possibly for state, depending on your state). WS income has two advantages. You do not pay fica contributions on it (medicaid and social security). And it is not used in calculating your EFC. But it is taxable income. </p>
<p>Whether you owe taxes on it and your taxable scholarships/grants, and how much, will depend on how much your total income for the year is. The standard deduction for a single person for 2010 was $5700 so there is no tax on the first $5700 (as long as you have no unearned income, then it gets more complicated).</p>
<p>You may want to keep this in mind for the 2011 tax year as you probably will owe some taxes.</p>
<p>Tetrahedr0n, the money’s all gone. I spent it on room and board and other living expenses for the fall semester.</p>
<p>Oh. Great. Didn’t know work-study was taxable…where do they expect this money to come from? All the money I get is used on living expenses; I don’t make enough to pay taxes or other things like this. Currently I’m broke. I didn’t know this would be so complicated.</p>
<p>Rox, how much was your earned income last year from all of your jobs? As swimcatsmom said, the first $5700 of income is exempt for single people, even if they’re dependent students. When figuring your taxable grants/scholarships, deduct all of your tuition, requred fees, and books from the total you received. Add that to your W-2 income and see if it exceeds the $5700 mark. If it doesn’t, you probably don’t need to file a return at all.</p>
<p>swimcatsmom – although the 1098 came addressed to our student, for the American Opportunity Credit, if the taxpayer who pays the tuition and other qualified expenses is the parent of the student, it is the parent who files the form and receives the tax credit, correct? But, if it’s a situation where scholarships, etc. exceed tuition, etc. paid by parents, the excess is reportable as income by student?</p>
<p>If a student is claimed as a dependent by the parent then the parent is considered to have paid the education expenses and is the only one who can claim the tax credits (even if, for instance, the student actually paid them with loans). If the student cannot be claimed as a dependent on parents taxes then the student is considered to have paid the expenses and is the only one that can claim the tax credits (though the refundable credit can be hard for a student under 24 to claim).</p>
<p>The taxable scholarships/grants are taxable income to the student.</p>
<p>on the subject of income tax, I would like to remind parents whose children have graduated (even though they may still live at home) to change withholdings at work. I suddenly realized, a year too late, that neither of my kids qualify as dependents for 2010. I went from head of household with 2 dependents to single with 0, from getting a refund of more than $3000 (because of education credits, etc) to paying several hundred dollars. I’m very sad. :(</p>
<p>muscimom1215, good advice. My son is 22, living at home and in grad school full time, so we can still claim him, but according to the tax laws, 24 and up or if they are supporting themselves, it is different.</p>
<p>S1 did a paid summer internship and was floored when his expected $2000 Fellowship first check weighed in at a much trimmed $1450 after federal, state, and local taxes were deducted. I expect he will get a W2 or similar form for this money because I don’t think it was reflected in the 1098 that he gets for his scholarship.</p>
<p>RoxSox: Make certain to file your tax return correctly even if you don’t have the money to pay the tax. The penalties for not filing are considerably worse than the penalties for not paying (and you may be able to get penalties other than interest waived because of your first-time status). The government will effectively give you a relatively low-interest loan (currently the rate is 3%) on your unpaid taxes. Eventually, if you don’t pay, they will engage in heavy-handed collection (like garnishing your pay), but you will have lots of opportunity to pay before that happens. Clearly you don’t want to let this build up, but trying to run away from the problem will make it a whole lot worse than it is.</p>
<p>Hello,</p>
<p>I was glad to find this post as I have a freshman and am trying to do our taxes and help with the FAFSA. Your help would be most appreciated!</p>
<p>So, I have two questions relating to the 1098T and Form 8917. As to the 1098T, the amount of scholarship money my son received is considered his income, right? It is 2,075. He does not need to file a return cuz his income does not exceed $5,700, but does he need to include that amount as student income on his FAFSA?</p>
<p>Second question: He has Perkins and Stafford Subsidized loans. ARe the amounts of these loans considered qualified education expenses? Chapter 6 of Form 970 seems to say so??</p>
<p>Thanks!!</p>
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Only any amount of scholarships/grants in excess of qualified education expenses (basically tuition, mandatory fees, required books) is considered income.</p>
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No. loans are not qualified education expenses. They are loans. But qualified education expenses paid for with loans are still eligible for tax credits.</p>
<p>RoxSox, do you have someone to go through this exercise with you? A Parent? You’re a freshman right? Are you a Wisconsin resident? You must have had to submit a W-4 for work study. That should have told you it was taxable.</p>
<p>My son is a freshman and a Wisconsin resident. I went through this exercise with him before he left for spring semester. He had $1760 from a summer job and $600 from a fellowship stipend both on W-2s. He had $1400 of taxable scholarships and a very small amount of interest. Tuition, mandatory fees and required books and supplies are qualified expenses. Anything over that is taxable. He was required to have chemistry goggles and an I-clicker besides the books for example. You need to keep receipts for your book and supply purchases.</p>
<p>He doesn’t owe anything for federal but owes Wisconsin $53. The difference is in the standard deduction. The IRS considers taxable scholarships as earned income, Wisconsin considers it unearned.</p>
<p>Keep in mind that for tax year 2011, you will have 2 semesters of taxable scholarships/grants.</p>
<p>Thanks for your help swimcatsmom. So it looks like my son does not have to claim the scholarship money on his FAFSA.</p>
<p>The loans show up on his statement as payments/credits so am I right in thinking they count as qualified education expenses?</p>
<p>Thanks again!</p>