I always see everyone saying to make sure you add your scholarships to your taxes. My DD has a couple of housing grants and they are Grants, so we don’t have to worry about that right? Just wanted to double check. Thanks
edit, correction, SHE doesn’t have to worry about adding those amounts to her taxes.
Nope, you do have to worry about housing grants.
Scholarships and grants are not taxable if they are used for QEE, Qualified Education Expenses, which are tuition, some fees, and books and required supplies (lab goggles, aprons, art supplies). Grants used for non-qualified fees (transportation, insurance), room and board are taxable. Grants refunded to student are almost all taxable even if used for necessities like rent and food.
Wrong…you DO have to worry about that. Housing is not considered a qualified educational expense, and grants awarded for that are considered taxable income for the student.
Wrong, any grant used for housing is taxable, and SHE does have to worry because it is income for her. Fortunately for her, starting in tax year 2018 the standard deduction that covers taxable scholarships and grants increased substantially, so depending on her overall financial situation, it may not be an issue.
Grants, Scholarships…no difference. If the money is used for housing or other non-QEE, then the money is taxable.
I notice that you’re paying tuition from a 529. Is there a reason why you can’t use the grants for TUITION, and then use 529 funds for housing and food?
Some schools (I know Denver is one) give housing grants. When the grant is specifically for housing, that’s all it can be used for.
My daughter had a few grants that could only be used for tuition, which is more common. OP said she was asking about housing grants.
^^^
I know that she said “housing grants” but some schools just apply the funds to the acct and there’s no “real” distinction. Bama gives housing grants and they just get applied…no “tell-tale” as to what the money actually went for…could be fees, tuition, parking decal, etc.
My daughter’s bill had all the items broken out and what had paid for it:
$250 athletic scholarship for student fee
$125 athletic scholarship for student fee
$3000 athletic scholarship for meal plan
When that grant was used up, the next was applied. If something could only be used for one thing, like tuition, it was applied first (FRAG to tuition as it could only be used for tuition). There were only 5 billed items (tuition, 2 fees, meal plan and insurance) but there were often 13-15 line items because of the way the grants were applied to those 5 items.
Other daughter’s school just lumped it all together; all grants, scholarships, loans minus total billed cost.
I agree that it is unlikely the IRS will go into that much detail, but if you are audited, it is your responsibility to show that you have correctly allocated funds and paid taxes on the non-QEE.
My D has a tuition scholarship and a PHEAA grant. The tuition scholarship is not taxable, the grant can be used for housing, so is taxable.
We could reduce the grant by any qualified fees and books, but we claimed those for the AOTC.
So my D included the state grant in her income on her tax return.
mommdc
That’s exactly what we do.
You want to get all (or at least the first $2k) of the AOTC. We pay fees out of pocket each semester to get the full AOTC. Then pay federal tax on the scholarship at the student’s marginal rate on their tax return. We then use the 529 to pay for the remainder of R&B that wasn’t covered by the scholarships.
The bill on the student portal doesn’t really say what goes where, so if I get audited, who knows what would happen.
If any accountants have a better way, I would love to hear it.
It’s not that the bill has to allocate the funds, it’s just that some scholarships are restricted to tuition only, or to room and board only. If that’s the case, you have to allocate the funds that way even if the school doesn’t.
It’s highly unlikely that the IRS would pick up the nuance even in an audit, but that’s how the rules and regs read.
Did you read these replies? Do you understand that you DO need to pay taxes on certain grants?
@SeeksKnowledge hasn’t been back for a couple of days.
Hey I’m sorry guys. Don’t know why I’m not getting notification emails for this thread??
Anywho, yes I have been paying taxes all along on DD grants, this is her jr year. I was just having a conversation with a friend who’s son is starting college this year and he got grants. They were saying they didn’t need to pay taxes on the grants…although his are not distinguished housing/tuition.
I was just having a senior moment and was thinking dang I’ve been adding her housing grants to her income and maybe I wasn’t supposed to, hence the topic. Seems every year I have to relearn this stuff and it’s not getting any easier on this old brain. Thanks for the help and the replies 
Did he only get grants and they covered all costs? He may have gotten a combo of grants, loans and work study…and the family may have had a contribution.
MODERATOR’S NOTE:
Let’s not muck up the post with your friend’s situation, and focus on your DD. Your friend can post her own question.
You can’t do it yourself. Send a PM to @CCadmin_Sorin with the new email address.