Taxable Scholarships, Filing Status and FAFSA

[annoyingdad]

<p>For the purpose of having to file a return, taxable scholarships are earned income. See pub 501. </p>

<p>

Earned income. Earned income includes salaries,
wages, professional fees, and other
amounts received as pay for work you actually
perform. Earned income (only for purposes of
filing requirements and the standard deduction)
also includes any part of a scholarship that you
must include in your gross income. See chapter
1 of Publication 970, Tax Benefits for Education,
for more information on taxable and nontaxable
scholarships.

</p>

<p>Page 3, IRS Pub 501:</p>

<p><a href=“http://www.irs.gov/pub/irs-pdf/p501.pdf”>http://www.irs.gov/pub/irs-pdf/p501.pdf&lt;/a&gt;&lt;/p&gt;

<p>Only interest and dividends can be reported on the parent’s return, taxable scholarships can’t be. See the Figure 1 flowchart:</p>

<p><a href=“http://www.irs.gov/publications/p929/ar02.html#en_US_2013_publink1000203800”>http://www.irs.gov/publications/p929/ar02.html#en_US_2013_publink1000203800&lt;/a&gt;&lt;/p&gt;

<p>But yes, for form 8615, taxable scholarships are considered unearned income.</p>

<p>Amounts entered on line 44d of the fafsa are subtracted from the student’s AGI in the fafsa formula to not penalize the student for taxable scholarships/grants.</p>

<p>Can’t use estimated book costs. Keep receipts, you need to have paid for them.</p>

<p>Required supplies might include things like chemistry goggles, required art supplies for an art class, an I-clicker if required etc. They need to be required by the class and don’t include general things like notebooks, pens etc.</p>