HI
My son received a full scholarship for Marquette University that includes full tuition, all fees. He will be living in the Evans Scholar house and although housing is included, there is a $2500 per year cost for utilities, upkeep etc that gets paid to the Evans scholarship foundation. He will need to pay for books, meal plan and a computer which he will need. He received $850 in Pell Grant money and $500 private scholarship. I also have $4k saved in a 529 plan. How can I best use these funds without getting penalized by the government? I’m a single parent and cannot afford to seek the advice of a tax consultant. I always do my taxes on my own. Thanks in advance!
I don’t know the answer…but wanted to say congrats on your son’s scholarship - way to go!
Money for housing, books, meal plans can be covered without tax consequences by the 529 plan. Does the school require a computer? If so, it can be covered also. You can use the Pell for anything you want, and you’d have to check with the private scholarship to see if there are any limitations (tuition only?) on it. He can use the Pell for the computer, but if not required by the school, the computer doesn’t count as a qualified education expense. Your 529 plan may or may not allow it as an expense.
Do you want to save any of the 529 for future years or do you want to use it all up?
My memory from our Marquette tour this summer is that the computer is required. Congrads on the scholarship! It looked like a great place to spend 4 years.
I am no tax expert but know that the tuition and fees scholarship is tax free. Scholarships for housing, room & board are taxable for him if they exceed around 6k. Best to ask in the financial aid forum. Here is one relate thread:
http://talk.collegeconfidential.com/financial-aid-scholarships/1768503-taxes-on-room-and-board-scholarship-and-529-impact.html
thanks so much for the advice and wishes!
Do you want to save any of the 529 for future years or do you want to use it all up?
Regarding the above question, could I use it all in 1 year? I thought I read something that you can only use $2500 per year to be able to qualify for the tax break? this is what I think his expenses will be for this year. Would I be better off just using half of the 529 this year and half next from a tax standpoint? thanks again for your help!
meal plan $800 per semester $1600 per year
books approx. $1000 per year??
Scholar house fee $2500 per year
computer $800
Taxable scholarships/grants, the AOTC and 529 distributions can be complicated and need to be coordinated. People can point out some things here and there but if you want to accurately be able to do your and your student’s taxes yourself, you’re going to need to be willing to read and able to understand IRS Pub 970. Chapter 1 is taxable scholarships/grants, chapter 2 the AOTC and chapter 8 concerns 529 distributions. Even if you use tax software you really need to be able to understand what you are entering into it and what it’s doing with your entries.
Ugh I am really frustrated. I filed my sons tax return earlier this year and then had to make the fafsa correction. He was still going to get $825 pell grant. this was even after I had to go back in and use the data retrieval tool to send his return on fafsa. I just looked now because the pell wasn’t showing in his financial aid and when I went to fafsa it says the school made a change to his fafsa and now my EFC went up and his Pell is gone. What happened. Geez barely making a living as it is and ex will not give any support or college help so we’re struggling. $825 might not be a lot, but it was going to cover his computer or books or food for the year. I am really upset now/
Weren’t you going to originally not have him report his golf caddy income to the IRS and then you decided to follow the rules? This could be why the Pell disappeared. Can he buy the computer with his summer caddy earnings?
Ask the school what change they made. Sometimes they are correct, sometimes not. Just ask, and they will tell you. It may not be your son’s return but yours - you didn’t fill in a 401k contribution or reversed numbers, or your AGI was a little different from your estimate. While you have them on the phone…You might also ask the school if there are any other scholarships that are available for him. If I remember, all his aid is coming from Evans scholars. Didn’t he qualify for anything from the school for merit? I’d think he’d get something and see if he could use that for the housing contribution or meals.
Madison95
I don’t appreciate that your implying I was originally going to do something against the rules. I have come to find out since filing his taxes after talking to other parents none of them filed or ever filed.
Twoinanddone
The school said they added my 401k contribution. When I pulled up the SAR, the amount I contributed is on there twice now. In 2 differenti linea. Does that sound right?
Which 2 lines? 401k contributions should only be on line 94a.
I put it on 94b ( not sure why) and they put on 94a. Should I remove mine?
94b is for IRA contributions. Did you contribute to a traditional IRA? Has the DRT been used? If it has I would contact the school’s FA office and ask whether you or they should take it off if you didn’t contribute to an IRA.
Yes I contributed to a traditional IRA through work. And I put on 94b and did the retrieval tool which caused school to add to 94a. Shouldn’t it be one or the other?
If you contributed to a pre-tax 401k that amount should be on line 94a. If you contributed to a traditional IRA and entered the amount on line 32 of the 1040(or equivalent line of the 1040a) then that amount should be on fafsa line 94b. You made it sound like the amounts were equal. Neither the 401k contributions nor the IRA contributions in that case would have been included in your AGI, so yes, both would be added back in by the fafsa formula.
ETA: I’ve never contributed to an IRA through work, but if that was somehow done pre-tax even without entering it on line 32 of the 1040, then it still should be on line 94b. Any retirement contributions that reduce AGI in some way are added back in by the fafsa formula.
Hi yes it is a pretax 401k not a traditional IRA. For some ungodly reason I listed it on form 8880 on lines 1 and 2. Why I did this, I wish I knew #:-S .
Is my best bet filing amended tax return with its and corrected fafsa? Will he ever see the pell grant?
Ha I can’t even add the proper emoji
Did you get a credit based on the 8880? If so I think you need to amend as you double counted retirement contributions for the credit. But I’m not a tax expert. As for the fafsa, I would call the school’s FA office, explain and ask who should update it. If your fafsa was selected for verification, the school should probably do it because you doing it would undo the DRT’s value in satisfying verification. As for the Pell, we would have to know the AGI and the size of the 401k contributions and the amount of tax you paid to say. If you amend and owe more tax that would lower the EFC a little. After you get the correct numbers for the amended return, the tax paid fafsa question will have to be updated too.