I understand that some scholarships are taxed if they are used for room/board, basically non-tuition stuff. We are getting school grants, etc that will cover the tuition and part of the room/board. Because D’s dorm is considered on-campus housing but has a separate billing process, so we would pay for part of the dorm from the excess grant and our scholarship. In this case, the scholarship will be taxed. Does anyone know if you can tell the school about the outside scholarship (paid into the D’s bank acct), whether 1) they will keep the grant the same. I was told by someone somewhere that they would so that they don’t discourage the student from applying; 2) If we pay the school the scholarship $ to the school, can the school confirm that the scholarship was used towards tuition, and then pay the original amount of grant minus whatever is left, to my daughter. It’s complicated but hopefully, I have somewhat explained it.
If you have accepted any federal aid (loan, Pell grant, SEOG) you are required to tell the school about the outside scholarships. This may also be a requirement of the school for accepting any school scholarships or grants too (probably is). So you don’t have a choice to report or not report - you have to. It doesn’t matter if it is paid to your daughter directly or through the school. If you are getting a great deal of need based aid from the school, they can reduce that aid since the scholarship is covering some of your ‘need.’ Often it doesn’t reduce aid or the school reduces the loans or work study first, and may even allow you to use some of the outside scholarship for books or a computer or transportation before it reduces a grant used for tuition.
For taxes, you follow Pub. 970 from the IRS. There are some things that are considered QEE, Qualified education expenses - tuition, most fees, books (which you will probably buy on your own). You add up all those numbers. You then add up all grants and scholarships. Subtract the scholarships and grants from the QEE. If it is more, you pay taxes on the rest whether you use it for room, board or beer.
The school might give you a 1098-T which will show scholarships from the school (but not outside scholarships) and the tuition and qualified fees, but often the 1098T form are not correct. They do not include books. They do not mention R&B at all. Just keep your own records.
I am guessing you know this…but it doesn’t matter where the housing is located. Grants and scholarships in excess of QEE (and room and board are not) are potentially taxable. BUT a lot will depend on your daughter’s overall income…
Right @BelknapPoint ?
In terms of the outside scholarships…you are REQUIRED to report these to the college…you need to ask the school their policy. Some colleges will reduce need based aid starting with self help portions like work study and loans. Some will allow you to stack these scholarships up to a certain point (either to fulfill need, or to meet the cost of attendance). You have to ask your college the policy.
You will keep track of what pays for what.
Can you ask the provider of the outside scholarship to delay paying it until January?
It sounds like the money is not need for fall semester because you wanted ‘whatever is left, to my daughter’.
My kids’ schools did not have breakdowns. Do be careful in timing your payments for the spring semester. Especially if you have a preference as to what year you want the payments to be shown. That last year in particular.