<p>Thanks folks. I wrote this article in order to answer some frequent questions. The material in the tax article is still valid even today.</p>
<p>This should be kept as a sticky post, moderators</p>
<p>Thanks for starting this most informative thread. I'll be sure to grab your book. </p>
<p>Best Always -
S</p>
<p>There's a wiseguy on every thread.</p>
<p>What about US citizen attending Canadian School with stipend and additional scholarships with total exceding COA?</p>
<p>Once a year, I bump this thread because I know that many parents and kids should know this information. The information contained in this thread is still accurate as far as I can tell. Thus, this is the 2006 bump.</p>
<p>I am glad you bumped this up. I have just recenty been researching IRS information on this very topic since my S received more in scholarships than his total cost for tuition, room, board, books, etc. It was helpful to learn what portions qualified as deductible so I am now better informed as to the anticipated taxable amount so we can plan ahead.</p>
<p>If a student has a scholarship that he has to pay taxes on, is it possible to claim moving expenses on his tax form?
It makes sense to me since a student had to move to his college town in order to get a scholarship from his college. Does IRS allow to do it?</p>
<p>... furthermore, you need to remain employed in the new location for at least 39 weeks during the 52-week period following the move. There is also a "distance test" in order to claim the deduction.</p>
<p>Anyone have an answer: What if the yearly scholarship requires summer travel and extra money is given by the school for that travel, but the student pays out for the trip more than he/she was given by the summer stipend?</p>
<p>TAXWATCH
Dig a little deeper
Some tax deductions and credits will be harder to find this year</p>
<p>By Andrea Coombes, MarketWatch
Last Update: 2:43 PM ET Jan 17, 2007</p>
<p>(This update of a column originally published Jan. 15 specifies where the IRS would like taxpayers to make notations on deductions that don't appear on printed tax forms.)
SAN FRANCISCO (MarketWatch) -- This year, thanks to Congress making tax-law changes long after the IRS printed its forms, some taxpayers will spend a fair amount of time trying to figure out how to take the deductions that don't appear on Form 1040 and elsewhere....
...Tuition deduction
One such deduction is for tuition and fees paid for higher education, now available for 2006 and 2007. Taxpayers can deduct up to $4,000 of tuition and fees paid to colleges. The tax break starts phasing out for single filers with an adjusted gross income of $65,000 or more and for joint filers with an adjusted gross income of $130,000 or more.
But, where taxpayers claimed that perk last year -- on Form 1040's line 34 -- this year they'll find an entry allowing them to claim jury-duty pay they gave to their employer, Luscombe said.
This year, to claim the higher-education tuition and fees deduction, taxpayers need to go one line down, to line 35, and write the letter "T." Line 35 refers to a "domestic production activities," which is a deduction that taxpayers can also claim on that line.
If you can claim both the tuition deduction and the domestic production activities deduction, you'll need to write the letter "B" on line 35 and attach a separate statement explaining both deductions, according to CCH.</p>
<p>They also won't start processing returns with the deduction claimed until, I think, February 3rd (refer to the irs.gov site for details). </p>
<p>If you have already purchased tax software, be sure to check with the developer that this update is available as a patch.</p>
<p>Is an award different from a scholarship -- in terms of being defined as earned income?</p>
<p>Previous posts indicate that a scholarship is earned income -- if used for room and board, or anything other than tuition, books etc. What about a prize? Not a gambling prize...or a TV show prize...but a prize won by entering an essay contest. Is it defined as earned income?</p>
<p>If this question is answered somewhere else on this thread...just point me to the correct post. If Taxguy or someone else can't answer because of professional reasons....I'll understand!</p>
<p>Thanks.</p>
<p>Just a note - you probably are aware that there are several other tax issues that were determined too late to be included on the print tax forms. Best solution, in my book, is to do your taxes using one of the online tax softwares. If you have income under about 52,000 you can do your taxes for free using the online software links from the IRS website.
[quote]
Free File allows taxpayers with an Adjusted Gross Income (AGI) of $52,000 or less in 2006 to e-file their federal tax returns for free. That means 70 percent of all taxpayers – 95 million taxpayers – can take advantage of the Free File program.
[/quote]
. Here's the link: <a href="http://www.irs.gov/efile/article/0,,id=118986,00.html%5B/url%5D">http://www.irs.gov/efile/article/0,,id=118986,00.html</a></p>
<p>bump............</p>
<p>You might want to check with your accountant regarding scholarship monies used to pay university required fees and books being tax free. While Pub 970 regarding educational expenses talks about books being a qualified expense for tax free scholarship money if required by all students in the course, further in the publication when describing qualified expenses for the Hope credit, they give examples of books NOT being a qualified expense. For that credit, they are only qualifying IF the university requires everyone to have the books (no sharing, checking out of library, etc) AND the university REQUIRES that the books be bought from them.</p>
<p>Also, they give an example of student activity fees being tax-free under scholarship but not a required student health fee since that is completely for the student’s personal benefit. </p>
<p>Please do not take my word for any of this. Just know my accountant/former IRS agent guy said NO to books bought with scholarship money so please check with your own tax professional.</p>
<p><a href="http://www.irs.gov/faqs/faq7-4.html%5B/url%5D">http://www.irs.gov/faqs/faq7-4.html</a>
The following is taken from the above publication</p>
<p>7.4 Child Care Credit/Other Credits : Hope & Life Time Learning Educational Credits</p>
<p>How is the amount of the Hope or Lifetime Learning Credit determined?</p>
<p>The amount of the credit is determined by the amount you pay for qualified tuition and related expenses paid for each eligible student and the amount of your Modified Adjusted Gross Income (MAGI).</p>
<p>References:</p>
<pre><code>* Publication 970,Tax Benefits for Education
* Tax Topic 605,Education Credits
* Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)
</code></pre>
<p>What expenses qualify for the education credits?</p>
<p>Expenses that qualify are tuition and fees required for enrollment or attendance at any college, vocational school, or other post-secondary educational institution eligible to participate in the student aid programs administered by the Department of Education.</p>
<p>Qualified expenses do not include books, room and board, student activities, athletics (unless the course is part of the student's degree program), insurance, equipment, transportation, or other similar personal, living, or family expenses. The cost of books and equipment are generally not qualified expenses because eligible educational institutions usually do not require that fees for such books or equipment be paid to the institution as a condition of the student's enrollment or attendance at the institution.</p>
<p><a href="http://www.irs.gov/publications/p970/ch01.html%5B/url%5D">http://www.irs.gov/publications/p970/ch01.html</a>
The following is taken from the above publication</p>
<p>Amounts used to pay expenses that do not qualify. A scholarship amount used to pay any expense that does not qualify is taxable, even if the expense is a fee that must be paid to the institution as a condition of enrollment or attendance.</p>
<p>Related expenses. Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance.</p>
<p>In the following examples, assume that each student is an eligible student at an eligible educational institution.</p>
<p>Example 1.</p>
<p>Jackson is a sophomore in University V's degree program in dentistry. This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. Because the equipment rental fee must be paid to University V for enrollment and attendance, Jackson's equipment rental fee is a qualified expense.</p>
<p>Example 2.</p>
<p>Donna and Charles, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. Charles bought his books from a friend, so what he paid for them is not a qualified education expense. Donna bought hers at College W's bookstore. Although Donna paid College W directly for her first-year books and materials, her payment is not a qualified expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution.</p>
<p>Example 3.</p>
<p>When Marci enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and the student government. No portion of the fee covers personal expenses. Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. Therefore, it is a qualified expense.</p>
<p>Sorry for asking this question again. </p>
<p>Does IRS prohibit to claim the moving expenses on a student's 1040-EZ?
Could you give me a reference? </p>
<p>Circumstances: freshman (time test), 3000 miles from home (distance test), scholarships exceeding T+R+B. </p>
<p>Thank you very much.</p>
<p>Does "scholarship" mean merit or athletic awards only? Is a student's need-based financial aid considered a "scholarship" for tax purposes?</p>
<p>TanCat -- the moving expense deduction is only for a related job change and school is not a job (even if you have a scholarship). Scholarships and merit/financial aid awards are not considered "earned income" and will not qualify. </p>
<p>"If you moved because of a change in your job location or because you started a new job, you may be able to deduct your moving expenses if your move is closely related to the start of work."</p>
<p>You also cannot count a work-study job as the reason for the move -- because the actual purpose of the move is to attend school, not work at the school library. </p>
<p>The irs doesn't have a line specifically clarifiying it for students -- but the description of the deduction is fairly straightforward. If you have any doubts, call the IRS directly.</p>
<p>Moving expenses deductions are one area that the IRS exams pretty closely and will trigger an audit it is doesn't look kosher (I know that from experience!)</p>
<p>I am a freshman in an out-of-state public University.
My only income is the scholarships granted by the University.
I did not have any income in 2006 in my state. </p>
<p>What state taxes should I pay?
Non-resident OR Resident?
A state where my parents claim me as dependent OR a a state where my U is located? </p>
<p>Any advice would be greatly appreciated!!!!</p>