Hey I was wondering if you guys know if we have to pay taxes for financial aid and scholarships? I’m filling out FAFSA for next school year and it is asking me if I plan on filing a tax return, and I have no idea if I’m supposed to. Financial aid and scholarships are my only income other than a few thousand dollars my grandparents gave me and a couple loans. I got about 11,000 in financial aid and scholarships (mostly grants) this previous fall term, and at community college last year I probably got 4,000 or 5,000. Are you guys filling out a tax return? Let me know if you need more information, thanks.
I’m filing, but that’s because I work.
To be honest, a tax professional is probably you’re best bet for advice. You can also post in the Financial Aid Thread
http://talk.collegeconfidential.com/financial-aid-scholarships/
@luckie1367
Oh yeah, you’re probably right. I guess I’m just used to the UC forum lol but thanks.
I recommend using Turbo tax online. They will ask you a series of questions to determine whether or not you need to file taxes, and if you do need to file which forms work best for you. They really walk you through everything step by step. As long as you have your tax documents it’s super easy and it doesn’t take a long time at all. and it’s completely free for your federal tax return.
@2016Candles
OK I’ll check that out, thanks!
@music1990, You do not pay taxes on anything that is a gift. Scholarships are gifts, as are grants.
Scholarship money used to pay room and board is taxable. Depends on amount whether you will owe anything
Since I can longer get in up there, let me add, gifts are filed with the IRS by the gifter, not the recipient. In terms of your grandparents they file a gift tax return.
@lindyk8
Alright sounds good, thanks. The idea of having to do taxes already is really sobering so I’m glad I can skate by one more year.
The following link governs taxable scholarships. In short, if your scholarship exceeds your expenses, the excess portion is taxable. And as scmom12 said, scholarship money used for room and board is taxable.
Mea culpa. @SFS Rules is right! I had no idea these were taxable as all the scenarios for tuition on the UC sites never mention taxes as possible parts of the net costs (nor do they mention it anywhere), which seems like a misrepresentation.
However, the taxable amount should be negligable, which is why they might not mention it in the scenarios, especially if you’re adding your grandmothers gift (you do not pay taxes on that). As I recall you’re living in an apt, so you’re probably not paying more than about $11,000 a year for food and living, not counting grandma’s gift. So in the end, I doubt you will pay taxes.
I found a page that might explain the irs form:
http://www.ehow.com/how_12021347_claim-cal-pell-grant-income-taxes.html#page=1
Did my taxes yesterday 
Hey @luckie1367 , a question about grants, scholarships: can you pick where to apply stuff or does the UC do it? In other words, could you take a $4000 scholarship and decide to put it toward tuition, or will cal grant b just automatically apply it there? (That was just an example.)
@lindyk8 that is a great question, and I have no clue. Sorry!
I would hope that you can apply it to specific things, but I am really not sure.
Oh, OK, thx. I was just thinking, I’m sure in some cases, now that I see there is the small chance of taxes, there could be ways to creatively handle it to the advantage of the student - sometimes.
I kind of think I found an answer. You cannot pick and choose the order. The UCs determine where the money is being applied, in this order:
Cal Grants
Individual UC funds
Blue and Gold
If qualified for blue and gold, it is only added if first two don’t cover, and if someone has cal grant B, most likely blue and gold would be eliminated second year. But Cal Grant is always in position one - I believe.
Per the IRS publication, scholarships and grants are treated the same. As such, it doesn’t matter whether the scholarship or grant is “applied” to tuition, books, and fees. Add up the total scholarships and grants you have, and subtract ALL tuition, books, and fees from it. The remaining funds will be taxable.
With a $11,000 taxable scholarship/grant and a $6,200 standard deduction, you owe $515.
At the UCs, IIRC, the order of precedent in applying “scholarships/grants” towards tuition and fees is: GI Bill, Grants, then scholarships. The amount of GI Bill benefits received is offset by a decrease in grants, while scholarships remain the same.
Thanks @"SFS Rules" , and he does have a bit more deduction from his grandmother. But this is what is glaringly wrong with the whole taxing thing. A person making $5000 a year should not be taxed at all. What a JOKE!
BTW, sfs I cannot get your name in to accept it no matter what I do.
It really depended on how much you received and what’s your current income. I had same situation last year when I got 10k grant and I only claimed $500 on grant. I checked with my tax advisor, she said you could do that but in the case of IRS rechecked your tax, they will tax you on amount you haven’t claimed. The chance they investigate your tax is small, so I took my risk and claimed a small portion of it. Or else I would end up paying $700 to IRS 
everything was fine last year, so I guess I’ll retry this year.
So the idea is, as long as your income doesn’t exceed your standard deduction at your current income bracket, claim some of them but make sure to keep it under the ceiling.