So, D is going through a myriad of paperwork and details for a spring semester study abroad. Payment is due to the the study abroad program provider tomorrow. We were paying out of pocket for this, as her only financial aid is a scholarship that can’t be applied to this particular program. Late last week she recieved a specific study abroad scholarship through her school that she had applied for. There’s some paperwork involved in letting the provider know about the scholarship so they will accept partial payment from us and wait on the scholarship disbursement. Today the school is asking whether we want the scholarship paid out to D directly, or to the provider. Does anyone out there know if it makes any difference for tax purposes or otherwise how we handle this? On the paperwork and timeline side, it might be simpler to have it paid to us and just pay the provider in full by the due date. We have to make a decision quickly.
A secondary and less urgent question is how scholarships and expenses specifically for study abroad are handled for tax purposes. This will be her second study abroad and she’s gotten several specific study abroad scholarships between the two programs. All this will have to be dealt with as far as taxes this next spring.
The difference it might make is which tax year the payment is made in. If paid directly to you, will it be in 2017? If paid to the program will it be 2018?
I always kept the scholarships in the same year as the tuition/bill was paid. Daughter’s school bills in December but no scholarships are posted until January, so I kept all payments that way too. When she went abroad last year, the school did pay all scholarships and FA to the student and we had to pay the study abroad program ourselves (and that was a surprise to me!). The school was VERY good about processing the aid in January early so we could pay on time (her semester didn’t start for a week after she was already in England and two weeks after we had to pay the study abroad bill). Anyway, we could pay the study abroad program by credit card, ad then I just had to wait for the school’s payment and pay the credit card bill. Worked out.
@twoinanddone, do you know if the tuition part of study abroad was considered the tax-free part of the scholarship, and the housing/food/travel/ins the taxable part? Did the study abroad program break it down like that?
She just did this in Jan 2017 so we haven’t received any paperwork yet, but my understanding is that even though the bill was paid to a third party, the same rules for FA apply. She received the same FA from her school, plus an extra $1000 (thank you Dick Chaney) for study abroad. The study abroad program is sponsored by her school so I think the third party is more of a billing service and the ‘tuition’ part goes back to the University as the university supplied some of the faculty in London. The only things billed by the school were tuition and housing and we paid for food and transportation directly. Oh and there was a charge for health insurance that we paid, but then the school upgraded so I don’t know how that will be reflected on the 1098-T.
I’m planning on doing the taxes the same way. This child’s scholarships and grants do not cover tuition so she hasn’t has to pay any taxes on her room and board.