<p>There's a checkoff list in the Student Financial Information section of the FAFSA with an item labeled "Grant and scholarship aid reported to the IRS" and a hint saying "Check the box if you (or your spouse) received grant and scholarship aid and reported the value to the IRS as part of your (or your spouse's) adjusted gross income in 2010."
Should I be reporting the financial aid/scholarships that I received for my Fall 2010 semester to the IRS, or should I just leave that item unchecked?
Thanks.</p>
<p>Generally, grants and scholarships are only reported as income if they exceed the cost of tuition and fees and books and supplies. Grants and scholarships that cover room and board are considered taxable income and need to be included on your taxes.</p>
<p>As long as a grant or scholarship doesn’t explicitly say it is for room and board, you can apply it all towards qualified expenses first before calculating the excess that is taxable.</p>
<p>There are lots of corner cases though. Here is a good article:</p>
<p>[Are</a> Scholarships and Fellowships Taxable?](<a href=“http://www.googobits.com/articles/1625-are-scholarships-and-fellowships-taxable.html]Are”>http://www.googobits.com/articles/1625-are-scholarships-and-fellowships-taxable.html)</p>
<p>IRS Publication 970 has the full details, but reading it might make your head explode:</p>
<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>
<p>Scholarships and grants that exceed tuition, fees and required books are taxable income. If you have enough income (including the taxable part of scholarships/grants) that you are required to file a return (or if you are filing a return anyway to get overpaid taxes refunded) then you must include the taxable scholarships/grants on your return. </p>
<p>If you do a tax return, then on FAFSA your AGI from your tax return will include the taxable scholarships and grants. You should report the taxable scholarships grants where asked on FAFSA - this is so that your AGI will be reduced in the FAFSA formula by the amount generated by taxable scholarships/grants. (for instance if your AGI is 12000 and $4300 of that is taxable scholarships/grants - the EFC will subtract the 4300 from the 12000, leaving $7700 income to be used in the formula)</p>
<p>With my aid, I still have to pay ~$4000 a year. I’m also living off campus and earned ~$2000 from working in 2010.
According to the criteria stated above, I wouldn’t have to check off the “Grant and scholarship aid reported to the IRS” item, nor would I have to report my financial aid/scholarships to the IRS, right?</p>
<p>You should get a 1098T from the college which will give the amount of financial aid/scholarships as well as allowable expenses. If your aid exceeds the allowable expenses, it’s reported as income.</p>