<p>D, a high school senior, has received scholarships from outside sources in excess of the tuition and other qualified expenses, owed for Year 1 at university. Is the excess taxable? Or can it the balance just be applied to pay for tuition in Year 2 without creating a taxable event? </p>
<p>We don't want to end up in a situation where she has to pay taxes on monies that exceed her tuition bills for school Year 1. The IRS publication 970 doesn't address this situation.</p>
<p>Scholarship money in excess of tuition and fees IS taxable for the student. Remember…part of that will be for 2009 and part for 2010 (of course if she receives aid like this for her soph year…that will be 2010, 2011).</p>
<p>Even IF your school allows her to carry the money to next school year, the tax is assessed based on when the money is dispersed to your daughter…not on when she spends it.</p>
<p>Before you decide that she shouldn’t take aid that will pay for her room/board, you need to really think about it. The amount of tax owed will be a fraction of the costs of PAYING for those things out of pocket. Remember students do have income that is exempt from taxes (about $5500 this year…or maybe it was $5700). The taxes on the balance would be MUCH less than paying for room and board at ANY college I can think of.</p>
<p>Don’t be penny wise and pound foolish.</p>
<p>Thanks, thumper1. </p>
<p>One of the scholarships lets her take the money all in year one, or dispersed over 2, 3 or 4 years. It sounds like she should take the money over a longer period. Then her tax exemption would help to avoid taxes on any balance in excess of the tuition for the remaining scholarships.</p>