Scholarships and taxes

<p>So how exactly does a student report a scholarship on their taxes? Do scholarship companies send W2s? And do they have to report all scholarships, even if the scholarship wasn't in money? (Say, a free airline ticket)</p>

<p>If a student's income plus scholarship is below the $6,500 threshold, do they still have to file?</p>

<p>I think my son will file to get back his federal taxes, but what I realized is that his scholarship, which is 6K a year, is applied by semester, so for 2012, he only got $3,000 of the scholarship. Combine that with his $1,800 income, he made $4,800. Next year, the full 6K will be applied (to spring, 2013 and fall, 2013), so things will be different for 2013.</p>

<p>Did he get any grants in addition to the scholarships? How much was his tuition + mandatory fees + required books and supplies? If the scholarships/grants were less than that, none of his scholarships/grants are taxable.</p>

<p>No, scholarship companies don’t send W-2s. Colleges do send a 1098T with all scholarships/grants credited by the college and all tuition + fee amounts billed by them.</p>

<p>

$6500 threshold? </p>

<p>The standard deduction for a single person for 2012 is $5950, not $6500 (not sure where that number is coming from). If all income is earned income (taxable scholarships and grants are treated as earned income for tax purposes) and does not exceed the cut off, then it is likely the student will not have to file taxes (though should for a refund if they worked and had taxes deducted). If there is unearned income, the cut off for filing is much lower.</p>

<p>annoyingdad,</p>

<p>The school bills per semester and thus breaks up the aid per semester. So, the breakdown looks like this:</p>

<p>Balance Due Spring Semester: $26,824 (for tuition, room and board)</p>

<p>Grant from school, Spring Semester: -$22,471
Outside scholarship: -$3,000</p>

<p>Balance Due: $1,353</p>

<p>I don’t see the fees broken down; that is, I don’t know exactly how much is tuition and fees and how much is room. I do know the meal plan is $1,957.50 per semester.</p>

<p>Ok, so he’ll get a 1098T to file taxes with?</p>

<p>swimcatsmom,</p>

<p>Sorry to be clueless what what’s unearned income? Is that like investment income? </p>

<p>Yeah, he got a whopping $82 of federal taxes taken out, so he’ll most likely file this year.</p>

<p>The 1098 *should *show only tuition and fees, not room and board. Don’t forget you can also offset the scholarships/grants with costs paid for required books. Those won’t show up on the 1098 but as long as you have receipts you are good. </p>

<p>Some schools have the 1098 available online rather than waiting for it to come in the mail.</p>

<p>

Threshold to file tax returns is $5950 (tax year 2012) for dependent. However, you also need to check your state tax return requirement.
See [Publication</a> 501 (2011), Exemptions, Standard Deduction, and Filing Information](<a href=“http://www.irs.gov/publications/p501/index.html]Publication”>http://www.irs.gov/publications/p501/index.html)
Under the section on Who Must File</p>

<p>I think you need to ask two questions before filing your son’s tax returns:

  1. Is the scholarship taxable?
  2. How do we report the taxable scholarship on the tax returns?</p>

<p>See IRS Pub 970 [Publication</a> 970 (2011), Tax Benefits for Education](<a href=“http://www.irs.gov/publications/p970/]Publication”>http://www.irs.gov/publications/p970/)
Chapter 1 [Publication</a> 970 (2011), Tax Benefits for Education](<a href=“http://www.irs.gov/publications/p970/ch01.html]Publication”>http://www.irs.gov/publications/p970/ch01.html)</p>

<p>yes, interest and stuff like that.</p>

<p>Hey $82 is $82. it might almost pay for a text book.</p>

<p>Room and board don’t count. They aren’t qualified education expenses(QEE). The school bill doesn’t show any fees at all? Then there must not have been any. How much was tuition alone? Then you can add the cost of required books and supplies if you kept receipts.</p>

<p>It sounds like more than just his scholarship will be taxable, some of his grant will be too.</p>

<p>Section 1 here has the details about taxable scholarships and grants:</p>

<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p970.pdf&lt;/a&gt;&lt;/p&gt;

<p>Look at ‘who must file’ here. Make sure to look at the requirement for someone who can be claimed as a dependent if you intend to claim him.</p>

<p><a href=“http://www.irs.gov/pub/irs-pdf/p501.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p501.pdf&lt;/a&gt;&lt;/p&gt;

<p>You may not get a mailed 1098T, often it is available for download on the college’s student portal.</p>

<p>And you need to be looking at the fall bill, not the spring.</p>

<p>Whew, so much to learn! </p>

<p>The fall and spring bills are exactly the same; I just happened to have been looking at the spring bill.</p>

<p>Ok, so I need to get an exact breakdown of that grant and what it covers, and if it covers more than just tuition and fees, it’s taxable, it sounds like.</p>

<p>and books, don’t forget books.</p>

<p>But not room and board. Scholarships and grants used to cover those are taxable.</p>

<p>Is there a more detailed bill on the student portal? The 1098T will show total scholarships/grants credited and total QEE billed by the school. But sometimes 1098Ts aren’t accurate. It’s best to have the detailed bills to double check. To the QEE shown on the 1098T you can add books and supplies if you bought them elsewhere and kept receipts.</p>

<p>The bill that shows up in my account (I requested to be on the bill pay) doesn’t have a detailed breakdown, or at least I’m not finding it yet. However, I did find the final financial aid offer from the spring. </p>

<p>Tuition and fees is lumped together as 42,050. The grant is 44,942. So, from all that I see, my son (not us, right?) will be taxed on $2,892 of the grant. Combine that with the 3,000 outside scholarship for the fall and his $1,800 from his own income, and he’s got a total income of $7,692. Given the fact that he’s been taxed on his income already, does it look like he’ll owe taxes on that other $5,892?</p>

<p>Am I doing that right?</p>

<p>Taxes on his job income have already been withheld but that income still needs to be included on the 1040. Yes, your son has to file his own return. You have to halve the tuition/fee and grant amounts for just the fall semester and then add the scholarship. Remember though to include required books and supplies as qualified education expenses. Do you have receipts from those purchases?</p>

<p>

How about the book expenses?</p>

<p>So your son has income of $7692, his taxable income should be $7692 - $5950 = $1742.</p>

<p>He will owe
Income taxes on $1742 - Withholding = $174 - $82 = $92</p>

<p>I think your son is doing great to have his tuition expenses paid for.</p>

<p>OP - Your son’s scholarship income will be the total scholarship and grants minus the cost of tuition (and books). Room and Board is not a qualified education expense and he will be taxed on that portion of the scholarship and grants which paid Room and Board. Your post #4 doesn’t break that down, but I suspect that he will owe some taxes on his scholarships and grants.</p>

<p>My son had significant taxable income one year when they changed their accounting cycle. The tuition (and room and board) were billed in December, but the scholarship was credited in January. The result was three scholarship payments, but only two tuition bills in one calender year.</p>

<p>4kidsdad and annoyingdad,</p>

<p>I forgot to mention that my son didn’t spend anything on books for the fall semester! He is a bona fide mooch (but his friends are wonderfully kind to him!) and thus, he borrowed one book, shared another book, and his other classes I think had the notes online or something. Now I <em>did</em> spend money on his textbooks for his last college class in high school last spring. Does that count? :-)</p>

<p>4kidsdad,</p>

<p>Thanks for the breakdown! I think he can afford $92. :-)</p>

<p>Oh yes, we are so very, very thankful for the financial assistance! This son was very blessed, indeed, to receive so much aid. </p>

<p>Every year won’t be this easy and who knows what they’ll offer him this year, though compared to last year’s income, now that I have both dh’s and son’s W2s, it looks like total income actually went down about $3000 overall. So I think my son’s sophomore year aid should be similar (though I understand the school will expect him to contribute more from a summer income which is understandable).</p>

<p>Hat,</p>

<p>In post #13, I broke it down a little bit more. If this school continues to do it the way they did this year, the second semester bill was sent about January 10th and first semester was some time in September. </p>

<p>I guess I’m not the only one with a first year college student! :-)</p>

<p>Just to throw this out there - you might want to treat an extra $2-4,000 as taxable, so that you have qualifying expenses to claim the American Opportunity Credit. </p>

<p>The first $2000 would result in 100% credit (if parents have no tax liability, 40% would be refunded), and taxed at the student’s marginal rate, which is definitely less than 40%. The second $2000 results in 25% credit, so might not be an advantage if the parents don’t have tax liability.</p>

<p>CTScoutmom,</p>

<p>Oh gosh, hm, I am not quite understanding this. But, I don’t think we can use the American Opp. Credit because any $$ that we have spent thus far has come from my son’s 529 account. He had about 6K in it and I’ve now withdrawn about $2700. In another thread, I learned that we can’t get tax credit because the money spent is already tax free. After this next school year, or even during the school year, we will no doubt use up the rest of the 529 account. At that point, we should be able to get credit (assuming the AOC is still around).</p>

<p>You decide to MAKE the scholarship money used to pay for tuition TAXABLE on your son’s tax return. Then, since tuition was paid with taxed dollars, you (the parent) can claim the American Opportunity Tax Credit. It’s practically free money, merely for the cost of your son’s taxes on that amount.</p>