This is going to be a long post, sorry!
Here are some facts about the student (me). I have a Pell Grant, Cal Grant A, and a grant based on need given by the university. On my 1098T form given to me by the university the box for “Payments received for qualified tuition and related expenses” (Box 1) is less than the “Scholarships or grants” (Box 2). Is this grant money taxable? I have tried to find the answer to this question by looking at the Publication 970 of the IRS (https://www.irs.gov/pub/irs-pdf/p970.pdf).
In page 5, I hit upon this bit of information “A scholarship or fellowship grant is tax free only to the extent: It doesn’t exceed your qualified education expenses; It isn’t designated or earmarked for other purposes (such as room and board), and doesn’t require (by its terms) that it can’t be used for qualified education expenses; and It doesn’t represent payment for teaching, research, or other services required as a condition for receiving the scholarship. For exceptions, see Payment for services, later.” Qualified expenses do not include "Expenses that don’t qualify. Qualified education expenses
don’t include the cost of: “Room and board, Travel, Research, Clerical help”
Suppose that the qualified tuition and other related expenses shows $100 (I would love to go to college for that price) and my scholarships and grants box is $150 (from Pell Grants, Cal Grant A, and need-based university grants) in my 1098T. I do not have any other income. I do not teach and each individual grant is less than the total expense of tuition and books. My books expense does not show up on my 1098T, but suppose it is $20. Thus my grants and scholarships minus educational expenses is $30. Is this taxable income? In other words, according to Pub 970 of the IRS, I think this income is taxable if the grants/scholarships are earmarked for room and board and they exceed the tuition and books expenses. Thus, this leads to the natural following question: Is Pell Grant, Cal Grant A, and University Grant based on need earmarked solely for tuition and educational expenses? I do not know because whenever my college disburses money it does so through one account in one giant pot and then it sends a refund for whatever excess amount remains. Thus, I am very confused if I owe any taxes.
TL;DR Does grant money from Pell Grant, Cal Grant A, and need based university grant count as taxable income? Is it officially earmarked for room and board or something else? If so, then would I be owing any taxes? I do not have any other sources of income (I do not have a job or do not hold stocks or anything of the sort)