<p>I need advices on how to handle tax reporting for 1098 that we received and the scholarship amount includes room, board, etc on top of tuition and fees. Should we take our child off as a dependent and have him file his own return? He has no other income. Advices for our very fortunate circumstance will be greatly appreciated. Thanks</p>
<p>We had the same great problem. Our account advised for D to file on her own. She receives a $10,500 stipend on top of tuition. She ( or rather we) owe just over $500 in tax.</p>
<p>Thanks Gibson. So, you took her off as a dependent on your 1040 and had her fill out her own 1040 (can she use the EZ form?). The amount received (box 5) goes into Wages box and where do you put the tuition/fees (box 2 on 1098)? Appreciate the help and we are about the same amount for stipend so I guess we will be paying about the same.</p>
<p>Scholarship income is income to the student and if the amount exceeds the filing requirements has to be reported on the student’s return. For someone who can be claimed as a dependent by someone else the filing requirement is $5800 including scholarships, W-2 wages, investment earnings etc. You can claim him as a dependent if you provide over 1/2 his support. For this purpose, scholarships and grants aren’t considered support the student provided himself. If you use tax software it’s easy to figure both your and his taxes with and without you claiming him as a dependent and see which results in the lowest family tax liability.</p>
<p>Yes, the student can use the 1040EZ if there isn’t some other reason they can’t. See the 1040EZ instructions on how to report scholarships. The amount that goes on line 1 is the scholarship amount minus the amount that was spent on qualified education expenses(tuition, mandatory fees and mandatory books and supplies). Have you checked that the 1098T is accurate? Sometimes they aren’t and requires referring to the actual bills and payments made. The school also usually doesn’t know the amount spent on books and supplies so they won’t be on the 1098T.</p>
<p>IRS publication 970 has the information on the taxability of scholarships</p>
<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>
<p>Don’t forget state taxes if you live in a state with an income tax.</p>
<p>Dad, the info above is very helpful. We don’t use tax software so we don’t know the tax implication. I am unclear on the 5800 amount. Is that the amount of support from us or the difference between what was given and tuition & fees?</p>
<p>The student doesn’t have to file at all if no taxes will be owed (unless there wads job where taxes were withheld and the student wants a refund). I think $5,800 is the cut-off.</p>
<p><a href=“http://www.irs.gov/pub/irs-pdf/i1040ez.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/i1040ez.pdf</a></p>
<p>See charts A and B on page 7 of the 1040EZ instructions. Chart A shows when a single filer who isn’t claimed as a dependent on another’s return has to file. Chart B is for those claimed as a dependent on another’s return.</p>
<p>If you do your taxes manually, it still shouldn’t be too difficult to figure things out both ways. Most of the numbers on the returns would stay the same. Scholarships and grants are considered earned income for federal taxes. State taxes may be different.</p>
<p>In our case, the “earned income” amount (Scholarship- tuition and related expenses) is around 10K so he is above the cutoff. I think we have no choice but have him file a 1040EZ and state tax return, not a problem for freshman year but the question will be which state as a soph. It’s more complicated 2012 since he lives 9 month in another state (different than ours) and the summer is abroad.</p>
<p>So scholarship below tuition is not taxable?</p>
<p>Scholarships that cover tuition and mandatory fees are not taxable, no.</p>
<p>Thanks juillet. overpaid tax but not much.</p>
<p>In our state scholarships are considered unearned income unlike for federal so check how your state treats it and what the implications are. And don’t forget the books and mandatory supplies.</p>
<p>I know CA does not conform federal law in tuition deduction, so does CA treat scholarship as income even if it’s covering tuition?</p>
<p>In our state scholarships that cover tuition aren’t taxed but anything above and beyond tuition is. S1 had a full ride (tuition,fees,books,room,board). S1 also had some U.S. Savings Bonds in his name, some investments and worked 20 hrs/week. DH ran the numbers both ways. S1 would get a bigger refund if his taxes were filed in his name but DH and I would lose much more.
So DH decided to claim S1 on our taxes (saving us money) and then just “refunded” S the money that he lost by us claiming him. It all came out good in the end. S1 got his max refund and DH and I took a lesser hit than if S1 had claimed himself.</p>
<p>California taxes the scholarships the same way IRS does, whatever is above tuition, books, fees, etc. is taxable - in other words dorm fees and meal plan. On top of that if your child goes to school out of state, and works, or if that state taxes scholarships, he/she needs to file a tax return in that state as well.</p>
<p>We found it was more beneficial to keep our child as our dependent on our taxes and have her file hers as a dependent. That way we were able to take the deduction for what we paid the college and that came out to be more than the taxes she owed. I ran it through the other way around and while it she owed less that way, she still owed quite a bit and then on top of that we didn’t get the deduction at all.</p>
<p>S2 received about 6K over the cost of tuition and books (that paid for his dorm) so he (actually we) had to pay taxes. He filed a separate return, but we still claimed him as a dependent. We are in California.</p>
<p>"That way we were able to take the deduction for what we paid the college "
Photoop, what did you pay the college since the scholarship is COA? I thought that you can only take a deduction for tuition and fees that you pay them.</p>