But remember that parent-provided health insurance is support. You shouldn’t keep both policies in place for 2024 if you want to try and escape the kiddie tax.
TurboTax handles it fine, but you need to do your tax return first, because you have to enter data from your tax return (taxable income and filing status IIRC) in the child’s return in order to perform the calculation.
Just to mention one additional way we avoided being slightly over the standard deduction and paying kiddie tax. Since she had some W-2 income, D made a deductible IRA contribution to match the excess income over the standard deduction when the scholarship income was added. Now she’s out of the kiddie tax net (and still has a low income) she’ll convert it to a Roth this year.
My daughter’s TA stipend is not federal FA. She hasn’t filled out a FAFSA since entering grad school. The school had no idea if she was rich or poor when she was accepted to grad school and was offered tuition, fees, insurance and a stipend. They didn’t ask if she was a dependent for tax purposes, if she lived at home, if she was a Wyoming resident She applied and was offered her package based on her application, not her financial need. I thought she got what all the grad students got, but no, her deal was her deal. Some students got nothing, some half tuition, some the full package, but not based on FAFSA.
The 1098 -T has the amount the school pays for her tuition and fees, had the amount charged for the tuition and fees, and that’s it and the two boxes were very similar (maybe the insurance amount different?). Not the Stipend amount, . She did not get a W2 or 1099 for her stipend amount (believe me, I looked for it because I help her with her taxes). She can use her stipend for anything (she lives off campus)
Her stipend isn’t that big and only for 8 months of the year, but her rent is low too. Wyoming only has federal income tax to deal with, no state income tax.
Why? What is the benefit, tax or otherwise? Since the new tax laws, the deduction for a dependent is very low, and the kiddie tax rates are very high.
It’s not about taxation - it’s about grad students suddenly being considered independent with low-income/no-income for Financial Aid purposes, when throughout college they had never remotely been eligible to financial aid, due to the parents’ income.
The benefit is that grad schools can grant work-study type of federal financial aid, thus funding what would otherwise have been unpaid “assistants” jobs. Just a little extra spending money in the hand of grad students that won’t have to come out of the parents budget (or loans).
I disagree with you. Yes, my low income daughter could qualify for loans and maybe work study, but grad student loans are Plus loans, so not subsidized (5% origination fee and currently 8.05% rate - no thank you). Grad students don’t get Pell grants. I don’t know if they qualify for WS because my daughter never filled out the FAFSA. Because she was fully funded, she got no additional grants, federal or state, from her school.
Her grad student stipend, tuition, fees are not federal aid - she never filled out the forms and the school offered it all with her acceptance package without knowing if she was rich or poor. She could fill out the FAFSA as an independent student, but all she’d get are Plus loans. The jobs in her department for grad students are not work study, they are stipends for teaching (or in her case cataloging material). There might be WS jobs available in the History department, but the grad students with funding aren’t working those jobs.
It sounds like OP’s daughter has a funded position, so not work study and we don’t know if she ever filled out the FAFSA either.
If I understand correctly, your daughter receives a stipend that is not W2 or 1099 income and isn’t reported on the 1098t?
I’m familiar with a few cases where that happened. In both cases the grad student received a stipend letter indicating that the stipend was considered taxable (unearned) income but was not reported to the IRS.
Not saying that’s the case for your daughter but I’m not familiar with any reason that stipend income in excess of qualified expenses wouldn’t be taxable income, usually unearned.
In any case, OP should be aware that even if not reported on a 1098t the income is still likely taxable.
They are called Federal Direct Unsubsized loans and grad students can take out $20,500 a year. I believe all you have to do is file a FAFSA each year to qualify.
Thanks for all the replies. I am learning a lot even though some of it is not applicable to our situation - we only filed the FAFSA once, her freshman year. I marveled at the ludicrous amount it returned for our EFC, thanked my lucky stars for her scholarships and the funds we were able to put in the 529 plan, and that was the end of our experience with FAFSA. But it is good to know those loans are out there for grad school (and easier to get since our income isn’t counted) because I’m sure she’s not the only student getting whacked by the kiddie tax and without the extra 529 money, she’d likely have to borrow to survive. And from what I understand, she has one of the more generous stipends in the country. Until their strike, Temple grad students were making 19K/year pretax - how is anyone supposed to live on that.
My daughter makes about $12k per year on her stipend. She only gets paid for 8 months. She lives on that because it is very cheap to live in Laramie WY and because she has a second job. Others in her program don’t even get that as they may not have a funded program.
@twoinanddone Wow that’s crazy. But at least it’s proportionate to the cost of living and she’s allowed a second job and I assume can work full time somewhere else over the summer. The Temple students were not allowed to work any other job and rent in Philly, while cheaper than Boston and NYC, is still $$$$.
My d’s stipend is paid over 12 months and she’s not allowed a second job or to work over the summer. I still think it would be enough to live on extremely frugally if she wasn’t getting socked with tax at our rate. The kiddie tax thing seems super unfair.
Same here - and that was my point, that I apparently didn’t make well earlier:
Once in grad school, FAFSA will use ONLY the student data, NO LONGER the parent financials - so you no longer deal with “ludicrous” EFCs. While no subsidized loans are available to grad students, starting with FAFSA again in grad school did unlock other aid for my daughter, despite us parents having a 529 in her benefit.
But does it really matter if she’s poor or rich? Unless you mean her college is giving her grants that aren’t federal? There was nothing my daughter could have benefited from by filing the FAFSA, unless she wanted the unsubbed loans and for them it wouldn’t matter if she was rich or poor as anyone can qualify for them by just filing a FAFSA.
Based on only her FAFSA, her university offered her an aid package, that did include loan offers, but also work-study. Obviously, she didn’t make use of the (unneeded) loan offers, but instead asked & received an even larger allocation for work-study.
Without filling out her FAFSA as an independent student (despite being a tax-dependent) who, independently, is “poor” as a church-mouse, she would not have been able to get paid by her department.
(I’ve since realized that your individual situation is different. I only mentioned it because it fit the topic headline which might draw others for whom this might well be relevant.)
My D23 got a full-ride at a state directional school. I thought I was going to be done filling out FAFSA, but to keep her scholarship we have to fill it out. I get why because if we do qualify for federal free money then the University would get the benefit. In our case that won’t be the case but I was so looking forward to not filling it out. It was pointless for us as no free money was coming our way.