@alooknac They can also be left for 2016 instead, I think. At least that’s what I’m doing, because then it would imply including also awards for spring 2016 & that seems too convoluted to me, specially when I did the same in 2014-2015. As long as you’re consistent, it should be fine, right?
OP, forgot about the job part…those earnings might put him over the $6300 limit
OP, my oldest son got caught way short last year. His taxable scholarship last year was around $7900 (this year, it’s around $8500). Add to that his 1099-Misc income for which he did not budget taxes, and, well, he owed $4000 in taxes last year that he did not have! 
Most fortunately, we got a much larger than normal refund last year, and that saved his btt. We paid his taxes last year, but the IRS made him do quarterly payments this year (and he works full time in the summer, working one full time job and then another job for two weeks, and then he works as much as he can during the school year) which he was able to pay. He lives very, very frugally at school, but he will graduate debt free, and we, too, are incredibly* thankful for both the need-based aid (they call it scholarship at his school) and his outside scholarship. I’m just glad we had the money to help last year…and he learned a valuable lesson he won’t forget!
@mom2collegekids He earned 3298 from summer job, plus 1092 federal work study = 4390 total.
Does anyone know if the 1092 gets counted towards the $6300 exemption? For some reason, I’m thinking WS earnings don’t.
It sounds like your son’s aid doesn’t cover full COA (personal expenses, travel, etc). If that’s the case, he can ask for a loan. He should get a small subsidized loan to cover…but ask SOON.
^work study isn’t taxable. prob doesn’t get included at all? or just gets listed as untaxed income?
mom2CK, the loan would only be subsidized if the EFC was very low. If COA-FA is higher than the EFC, the student can get the $3500 subsidized, but if not, it is unsubsidized. In this case, the FA is almost the COA, so little room to qualify.
Work study is taxable wages!
@Lilliana330 I don’t think it’s your choice which year to claim. Read Pub 970. Direct quote from page 13:
Qualified education expenses paid in 2015 for an academic period that begins in the first 3 months of 2016 can be used in figuring an education credit for 2015 only. See Academic period, earlier. For example, if you pay $2,000 in December 2015 for qualified tuition for the 2016 winter quarter that begins in January 2016, you can use that $2,000 in figuring an education credit for 2015 only (if you meet all the other requirements). You can’t use any amount you paid in 2014 or 2016 to figure the qualified education expenses you use to figure your 2015 education credit(s).
So, looking ahead to Tax Year 2016, you won’t be able to claim expenses paid in 2015.
@alooknac how about paying taxes on awards credited on 15 but meant for 16 semester?? does the same concept apply?
Soo if someone had to pay spring 2015 taxes for awards credited in Dec 2014, the gov wouldn’t take it? & if they did, they wouldn’t let you deduct the qualified expenses?
@alooknac Assuming that no credits are being claimed in terms of getting money back. Only deductions are being made (from qualified academic expenses) to reduce how much income is taxable.
@twoinanddone >>> mom2CK, the loan would only be subsidized if the EFC was very low >>>
the EFC is 0…nothing lower than that.
I would say the majority do. Other than here on CC I have never heard of a student filing a tax return for the income. The typical college student/parent has no concept of the tax complexities, and 1098-Ts are only informational tax forms so the IRS is not looking for any income to be reported.
My understanding is that federal work study income is treated as other W2 income, taxable federal income from wages. But that no FICA taxes are withheld.
Then on FAFSA you have to list the federal work study income in the student section under the question 44 c that asks if there was income from “need based employment”.
I think for AOTC it works differently, you can only use the expenses paid during 2015. But if you paid a bill in Dec for 2016 spring semester you can count it.
As far as determining taxability of scholarships I think you can offset a scholarship that posted in spring 2016 with tuition that was billed in 2015, but not sure.
I still don’t understand, so he had $12,808 in scholarships that covered room and board for one semester?
Isn’t that kind of high?
^^not that this applies to OP necessarily, but when I look at our situation for full year 2015, there were R&B scholarships, external & internal NMF, then some study abroad $ (R&B,travel, not tuition part) then some case competition awards…none of which are for QEE…it adds up pretty quickly. & not a bad problem to have, I keep reminding myself! Lastly, the school doesn’t issue 1098 to us at all since we aren’t ‘paying’ any QEE to them. So I have to pour over the bursar statement myself to determine the total taxable amt, which strikes me as kinda strange, since the amt of taxable income is actually pretty high (compared,say, to every little part-time job you get a statement for).
But, I agree: $12k+ for one semester, if only one source for R&B, does sound high…
Many students would just ignore it
I would say the majority do. Other than here on CC I have never heard of a student filing a tax return for the income. The typical college student/parent has no concept of the tax complexities, and 1098-Ts are only
^ Must say I’d love to know the answer to this! I get not many people have this problem to deal with, & I tell my kids that they wouldn’t turn down a raise, because, horrors, the taxes go up. But, for eg, I know a 2-MD couple, whose D is also on a full-ride & when I’ve commented ‘wow, the taxes sure become complicated though,’ they smiled kinda blankly at me. Assuming the tax bracket they are in, I think they would have noticed the tax ding on the R&B side…but perhaps it’s all in the hands of a good accountant & they just sign.
I also find it strange how this issue co-mingles the tax return of a single young adult with that of the parents.
This is correct; work-study income will generate a W-2 because the wages are subject to income tax, but they are not subject to FICA (Social Security and Medicare taxes). When completing FAFSA, work-study wages are deducted from reported student income, so a work-study job does not have a negative impact on future need-based financial aid.
Welcome to the “kiddie tax.” It’s not just an issue with taxable scholarships.
@Lilliana330 I think you’re asking does the same year restriction apply if you are using tuition as an adjustment to income rather than using the AOTC? Different rules may apply and I haven’t researched that. You should be able to find the answer in Pub 970 and/or instructions for the applicable line of the 1040.
Also, everybody, just a heads up, different rules apply as to qualified expenses depending on how you put them on your tax form. For instance, books are handled differently for AOTC vs. Lifetime Learning Credit (AOTC has more generous rule).
Don’t take the amounts listed on the 1098 for qualified expenses as gospel. I don’t even know why they have that box since the QEE vary depending on the credit being claimed. (I suppose they have it because most people don’t go any farther than that and it’s a good enough estimate but the one I saw recently was less than what the student could actually claim as QEE)
@Lilliana330 Is there a reason why you are using tuition as an adjustment to income rather than going for a tax credit? In general based on the financial benefit you should use AOTC, if not then Lifetime Learning, with adjustment to income last option. However there certainly may be instances where it is different for a particular taxpayer.
@alooknac I don’t think I can redistribute some of the award paying my tuition to room & board expenses, since it’s a tuition-only scholarship…Thus, no tuition paid to claim AOTC. I’m not sure if textbook expenses would be enough to make it worthwhile, have to do the math.
@Lilliana330, we also have a tuition scholarship. We just claimed fees and books as QEE for AOTC. It was still over $1000 and books alone were $500. Worth it because it was more than the kiddie tax my D paid for scholarships being used to pay nonqualified education expenses.