<p>Okay, so I know the room and board covered by a scholarship is taxable. Let's say total COA is $40,000. My question is if the family contributes some figure, say $10,000 (student and parent contribuitions combined), and the college awards scholarship aid for the remaining $30,000, and the college breaks down the comprehensive COA as including $9000 for room & board.........</p>
<p>Then how do you allocate who paid what for the room & board?</p>
<p>--Did the family contribution of $10,000 cover all of room & board, + $1000 more going to academic fees? (This would seem to resolve any tax due on the r&b portion.)</p>
<p>--Did all the family's $10,000 go for academic fees, and the room & board was completely covered out of the college's $30,000 scholarship? (Student will owe taxes on the $9000 for r&b.)</p>
<p>--Did the college and family split up the room & board proportionally to how much of the comprehensive fee they paid?</p>
<p>Anyone have experience with this question? Thanks!</p>
<p>I don't have experience with this, so I am not an expert. But the 1098-T has the amounts billed for qualified tuition and related expenses, and it has the scholarships or grants amount. I would think that the difference between the two would be the taxable portion. Just a guess.</p>
<p>Thanks, Kelsmom. I guess I would be helped if I got a 1098T from the college! This is my first year doing this, so I don't know exactly what to expect in terms of information from the school.</p>
<p>The college should have sent that form by today. Hopefully, you'll get it soon. I just got mine today - I use it to figure out if I can take a Hope or Lifetime Learning deduction.</p>
<p>For the purposes of the 1098T, you need to assume that the money first went towards tuition and fees and then went to room and board. In the example you gave above, the parent contribution of 10 covered 9K for room and board (so there is no income tax labilbiity), and 1K towards tuition and fees (eligible for deductions or tax credit)</p>
<p>rentof2 If you are a dependent, your parents take any tuition tax deductions or credits for tuition paid out of pocket, and the student pays any tax liability for any scholarships and grants that anything in excess of qualified tuition and fees.</p>
<p>
[quote]
For the purposes of the 1098T, you need to assume that the money first went towards tuition and fees and then went to room and board. In the example you gave above, the parent contribution of 10 covered 9K for room and board (so there is no income tax labilbiity), and 1K towards tuition and fees (eligible for deductions or tax credit)
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My understanding is that you can choose how the scholarships are allocated as long as they are not specifically for a particular expense. For instance my daughter has a tuition waiver so obviously that part of her scholarship has to be counted as paying for tuition and is tax free. The rest of her scholarships do not specify what they must be used for so we can choose that they are used for fees or for room and board, whichever is best taxwise. In her case it is beneficial for the scholarship to be considered to be used for room and board and her fees be paid out of pocket. Makes the scholarship a taxable scholarship but makes the fees useable for the Hope tax credit which is more beneficial taxwise.</p>
<p>An example for the Hope tax credit given in IRS 970</p>
<p>
[quote] Example 1. Jackie paid $3,000 for tuition and $5,000 for room and board at University X. The university did not require her to pay any fees in addition to her tuition in order
to enroll in or attend classes. To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan.
The terms of the scholarship state that it may be used to pay any of Jackies college expenses. Because she applied it toward her tuition, the scholarship is tax free. Therefore, for purposes of figuring an education credit (either Hope or lifetime learning), she must first use the $2,000 scholarship to reduce her tuition (her only qualified education expense). The student loan is not tax-free educational assistance, so she does not use it to reduce her qualified expenses. Jackie is treated as having paid $1,000 in qualified education expenses ($3,000 tuition $2,000 scholarship). Example 2. The facts are the same as in Example 1,
except that Jackie uses the $2,000 scholarship to pay room and board, and, therefore, reports her entire scholarship as income on her tax return. In this case, the scholarship is allocated to expenses other than qualified education expenses. Jackie is treated as paying the entire $3,000 tuition with other funds and can figure her education credit on the entire $3,000.
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</p>
<p>Editing to add - I am not a tax expert - the above is my understanding from minutely perusing IRS970 until by eyes were spinning in my head. The quoted example from the IRS seems to support it. It's what we are going to do so I hope it is right!</p>
<p>So, swimcat and other experts, does a Pell specify it goes to tuition 1st? What about state grants? Byrd? I suppose each school award must be determined by school.</p>
<p>As far as I can tell the Pell only specifies that it is for educational expenses - which I think can be anything included in the COA. My daughter has a full tuiton scholarship so her Pell and State grant cannot go to tuition. Part could be considered to be for her fees. But I think (just my opinion) we can also consider that her loans or WS as paying for fees and the Pell for room and board. I have read through the IRS 970 numerous times and don't see that that is something we cannot do.</p>
<p>Interestingly her school just lumps grants and scholarships together on her 1098t as 'scholarships' and lists her loans. My son's school does not list his loans.</p>
<p>Thanks scm, I was wondering what to do. Last year's merit award is pretty clear cut, but I just got the 1098T from the new school and I hadn't thought about the FA scholarships as counting as well. I didn't use the Hope tax credit last year (I believe there was some sort of income cap), but it might work for me this year and in the future.</p>
<p>Oh... this is so confusing to me. Ack. I guess I will wait until I get the 1098T (soon please!) and try to work it different ways to see what works best. Thank you all so much for the information and advice!</p>
<p>Navigating</a> the Form 1098-T Tuition Statement: Inconsistencies in Reporting is a great explanation of the 1098-T and how it may not always be exactly accurate as far as your taxes are concerned. My son (of course the parents) have had to pay taxes on his room and board scholarship money minus his book expense because with his summer job and employment at school, he makes enough to have to file. You list the scholarship as SCH on the tax form where it says wages. It drives me nuts that he is expected to pay income tax on that money, because if he went to school year round he would not be able to pay it--what if the parent refused? One year it was close to $500. But of course that is better than paying the $7000+ for room and board, so I will not complain too much. He has a scholarship for full tuition and r & b, and we have to pay the fees, which we've gotten the Hope credit on. You need to see if you will benefit more by being able to take the Hope or Lifetime learning credit or tuition & fees deduction or if the student will as far as what will be owed. It is very confusing--someone else can probably explain it better.</p>
<p>jtennis, I wonder the same thing, if you have some poor URM kid getting a 'full ride' to say Princeton with no loans, they get $50k in grants and $30k is tuition, how are they supposed to earn the money to pay the taxes on $20k? We have always paid my DD's tax due because I am the one saving money.</p>
<p>I do see the abuse in the system with kids getting loans & educational aid for ITT Tech & other less academic educational options and can see that tax free living expenses could add to the abuse!</p>
<p>Generally, scholarship income is tax-exempt if it pays for anything that is required by all students, so tuition, mandatory student fees, and then any class supplies that are required by all students, so any required books that are paid for by scholarship income is tax exempt. I wouldn't go so far as to say that pen, paper, notepads and staplers fall under that category.</p>
<p>You know how there are multiple intelligences? Well, one of mine is not taxes. :(</p>
<p>I read the article jtennis linked and now I even more confused. I get really lost on a conceptual level when it comes to how the information on the 1098T gets split somehow across the parents' return and the student's return. In normal life I feel like an intelligent and competant person... but when it comes to this stuff I feel just incapable of getting it. It's like tax-dyslexia or something. All the pieces of information float randomly around and never form a cohesive picture... it keeps moving. Egads.</p>
<p>Our taxes have never been complicated enough to require anything more than a no-brainer software program to complete. But this all gets more subtle than the software's "interview questions" -- so I need to get a grip on it myself.</p>
<p>But it's very late. I saw something on the news about how you should work on things that are really hard before you go to bed, and then somehow your brain processes that information while you sleep. Boy, am I hoping that's true!</p>
<p>All of you contributing to this thread, however, are fabulous.</p>
<p>
[quote]
I guess I will wait until I get the 1098T (soon please!)
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I've been running into this a lot. I've noticed most schools are NOT mailing the 1098T. You can go to your account at the school and view it or print it out.</p>
<p>I received the 1098T the other day and it lists total scholarships in box 5 and amount billed for qualified tuition in box 2. that's clear and simple. I'm understanding that the difference is the portion he pays taxes on. Someone mentioned that only if they earn a certain amount do they have to file. My son earned under $300. in work study. I would assume he has to file as his taxable scholarship $ (room and board) = $12,590. does this make sense? and this of course is his own tax return? thanks to you non tax dyslexics who are so kind...</p>
<p>My son has two scholarships that pay all his tuition, room and board. We just got a 1098T, which until this week I did not even know existed.I'm doing my taxes online with H&R Block and I posed the question of whether my son needs to file a tax return if this scholarship is his only income. The tax advisor said as long as the money is used for school related expenses it is not taxable. It seems to me from what you're all saying on here that it's a little more complicated than that. Obviously I'd love to believe that we don't have to pay anything. Does anybody know if that's accurate?</p>