<p>D has a scholarship and grant for school she attends. Also received outside money for scholarships. When filling out this year's tax forms, how does the IRS determine where the money went? Hope and Lifetime Learning apply only to tuition. What if school's scholarship and grants cover more than the tuition portion of the bill? I know the IRS does not let you deduct for room and board on scholarships but what about books, and other fees?. Know 529s can be used for any expense but am intending to save funds there till first child is out of college and therefore our EFC will be higher). From my prelinimary calculations it looks like almost everything applies to tuition only and that the Hope and Lifetime will not be available to us.</p>
<p>We plowed through this complicated issue last year at tax time. My recollection is that the scholarship money that's applied to tuition, fees, books, and necessary supplies, is tax exempt, but the remainder is taxable. I don't have the source handy-- so just going from memory.</p>
<p>We received a copy of a form from our son's school that showed how much was spent on tuition and fees-- this also went to the IRS.</p>