- Am I still eligible for Bright Futures since I have a full ride already?
- Does the extra local scholarships I have get taxed or do I simply keep what I get?
Some of your full ride is taxable (PLUS those local scholarships).
See IRS Publication 970.
Why would the full ride be taxable if I use it all?
Any scholarships awarded in excess of qualified educational expenses (QEE) are considered taxable income. QUU include tuition, fees, books and necessary supplies for school.
Any scholarship money used for other expenses like room, board, personal expenses, and transportation…are considered taxable income.
But you would only owe taxes if your scholarships plus other income exceeds the threshold for paying taxes.
Because that’s the tax code. Scholarships over and above the cost of tuition, fees, and certain course-related expenses (like books) are taxable. For instance, you must pay taxes on scholarship funds used for room and board, research, and other expenses that are not required for enrollment.
Yes, you get the BF if you qualify for it. You MUST apply before you graduate, you must being using it within 2 years of graduation (unless military or missionary).
It will be refunded to you if all your other school bills are paid. BF is not credited to the school until after the drop/add date because it is based on the number of credits for the semester. Yes, it is taxable if not used for QEE.
If I understand correctly, you not only have to pay taxes on the taxable portion of your scholarships, but your scholarship is taxed at your parents’ tax rate.
@annoyingdad hoping AD sees this thread and comments on the tax rate question.
What’s AD?
^^^3scoutsmom is correct for most dependent students.
I’m AD. Read chapter 1 of IRS Pub 970.
http://www.irs.gov/pub/irs-pdf/p970.pdf
Others have given that scholarships/grants in excess of QEE(tuition, mandatory fees and required books and supplies) are taxable income to the student. Taxable scholarships/grants are earned income for the purposes of having to file and for the standard deduction. They are unearned income for the purpose of the kiddie tax, form 8615. You will get your $6300 standard deduction to subtract from your taxable income but any amount above that may be taxed at your parents’ tax rate. Talk to your parents about this so you can plan for it.
AD, do you know if the student needs to pay estimated withholding during the year? My daughter didn’t owe any taxes this year because of the standard deduction, but will definitely owe next year because it will be for a whole year and not just for one semester.
The exceptions to the under withholding penalty are given at this link.