<p>OK, I'm trying to figure out taxes for my D who is on a full ride scholarship. I knew that the room & board part would be taxed, but assumed that the qualifying tuition and fees would not. However, looking at IRS pub #970, under Who Cannot Claim the Deduction (for tuition & fees):</p>
<p>"Another person can claim an exemption for you as a dependent on his or her tax return. You cannot take the deduction even if the other person does not actually claim that exemption."</p>
<p>Since she is a freshman and didn't start school until fall, that means she is a dependent. So, it sounds to me like she has to pay taxes on the full amount of the scholarship, whether I claim her as a dependent or not.</p>
<p>Anyone with thoughts or experience on this??</p>
<p>Maybe I'm wrong, but I think you are looking under the section that states who is eligible to take the hope credit and lifetime learning credits, both of which you or your daughter would not be allowed to do anyway, because she is on a full scholarship (ie no money paid by you for qualifying educational expense)</p>
<p>However, your daughter would fill out worksheet 1.1 to determine the taxable amount of her scholarship and then report that figure (which would be about the amount for room and board) and report that amount on line 1 of the 1040EZ or line 7 on the 1040. </p>
<p>Just a quick note. Make sure you deduct the cost of books, fees and equipment that qualify as tax free (I'm assuming these may have been out of pocket costs, and you can deduct them from the amount that you were given towards room and board)</p>
<p>jjcddg,
Thanks for responding. I'm looking on pg. 32, under "Tuition and Fees Deduction". </p>
<p>I'm not sure that she can deduct books, etc. either as she took money out of her 529 as qualified expenses to cover those costs.</p>
<p>I'm still confused. Everything I've ever heard about scholarships is that tuition will not be taxed, but reading the tax publication leads me to believe otherwise. Am I approaching this wong? Should she just subtract the tuition and fees (box 2 on Form 1098-T) from thte scholarship amount (box 5) and enter that amount on line 1 of the 1040EZ and not consider it the tuition and fees a deduction but rather a reduction in income earned??</p>
<p>Thanks to anyone that can shed some light, I really want to finish this up so that I can move on to the FAFSA and Profile! :( !</p>
<p>My son received scholarships that covered his room and board. Son had to pay taxes, federal and state, on that money. His father and I claimed him as a dependent so he could not claim himself, therefore he had to pay in but we saved money by claiming him on our taxes.</p>
<p>My daughter is also a freshman. We claimed her as a dependent. The taxable portions of her scholarships/grants (the figure after tuition/fees/books are deducted from scholarships/grants) are declared on her tax return.</p>
<p>I think jjc might be correct. You may be looking at the wrong part of the publication. </p>
<p>1. scholarships, Fellowships, Grants, and Tuition Reductions on pages 4-6 is the part you need to concern yourself with for determining the taxable part of scholarships/grants and there is nothing there about dependency. </p>
<p>6. Tuition and Fees Deduction on pages 32 to 37 does have that passage
[quote]
● Another person can claim an exemption for you as a
dependent on his or her tax return. You cannot take the
deduction even if the other person does not actually claim
that exemption
[/quote]
.
But you are not claiming a tuition/fees tax deduction - you are calculating how much of her scholarships are taxable. Different thing.</p>
<p>entomom - you are correct. If she took money out of her 529 account to pay for books she cannot also use them to reduce the taxable portion of her scholarships. You cannot "double dip". ie you cannot use a cost for more than one of the possible tax exemptions. For instance if you use the tuition and fees to reduce the taxable portion of her scholarships you cannot also use it for the Hope tax credit or tuition and fees deduction etc.</p>
<p>Yes you effectively reduce the income earned. (scholarships less tuition/fees). Make sure the tuition/fees tie in with the 1098-T.</p>
<p>It is all very confusing. I ended up creating an excel spreadsheet to keep track of it all. After the event this year but I have it set up ready fo the next tax year.</p>
<p>SCM,
Thank you so much!!! I was getting confused over what to do with the tuition and fees, and what you say makes sense--they come out of income (ie scholarship money) first, rather than taking them as a deduction later. That's where my problem was. Thanks also for confirming about the 529 withdrawals.</p>
<p>jjcddg,
Thanks to you too, I see Worksheet 1.1 now and everything becomes clear...</p>