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What tax form is issued for scholarships?

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Replies to: What tax form is issued for scholarships?

  • WantWhatsBestWantWhatsBest Registered User Posts: 109 Junior Member
    Probably very true. Very grateful for this forum and the informed experts on here!
  • WantWhatsBestWantWhatsBest Registered User Posts: 109 Junior Member
    @BelknapPoint , @allyphoe and @thumper1 and others:
    The questions continue. I went back to my tax guy. Cited page 27, etc. He changed that, so now on line 1 of the 1040, the scholarship is listed and noted as such with "SCH" on the dotted line and the amount of $1750. And he figured the deduction properly so tax liability is zero. Perfect. Except then he said he wasn't sure it should be added to earnings but will go with it -- and now that it is considered earnings, it impacts our state and local returns. Local: I called the tax service and explained the taxable scholarship issue. They asked what form it's reported on. No form I can tell other than the 1098-T. They said NOPE. Not reported/not taxable for local purposes. The STATE is much trickier and murkier. I can literally find nothing about scholarship income and whether it is taxable at the STATE level when it's considered non-qualified for FEDERAL purposes (e.g., room and board). I live in Pennsylvania. I read all 48 pages of the instruction booklet for the return form. I don't see a thing. I DID find a question posed on their site about someone having a full tuition scholarship, and the response was that it wasn't taxable. But it didn't distinguish that from a sch used for R&B that IS taxable by fed standards. So, totally stumped. Anyone have experience with the state of PA and this issue?
  • mommdcmommdc Registered User Posts: 11,137 Senior Member
    I'm not a tax preparer, but TurboTax included my D's taxable scholarship on line 1 with SCH next to it on the federal return, but didn't include it in income on the PA state return.

    rev-758.pdf says:

    "Are scholarships, fellowships or stipends taxable
    for PA personal income tax purposes?
    Generally, a scholarship or fellowship award made on the
    basis of need or academic achievement is not taxable if
    awarded to encourage or allow the recipient to further
    educational development.
    The award is taxable as compensation if given for past or
    present services or in expectation of future employment.
    For example, stipends paid to medical students for
    internships and residencies approved by the American
    Medical Association are taxable.
    If not taxable, the award must still be included as
    eligibility income on Line 9 of PA Schedule SP"

    Schedule SP refers to PA tax forgiveness.
  • WantWhatsBestWantWhatsBest Registered User Posts: 109 Junior Member
    @Mommdc -- thank you. I literally copied and pasted the excerpt you cited above and fired it off to my tax preparer who then confirmed -- no tax due to the state of PA nor locally. The fact that PA is so vague about it and doesn't specify qualified/non-qualified re: what the scholarship is used for really made me think it wasn't taxable in the state of PA's eyes. This helps me for the next four years and with my other son when he goes to school.

    Scholarships for room and board = taxable for federal. Not for state of PA. I'd really be sunk without this forum.
  • mommdcmommdc Registered User Posts: 11,137 Senior Member
    Does your son go to school instate? And is the other planning to as well?

    Some students are looking at a situation where they have to pay taxes to the state where they attend school.

    I'm glad it isn't taxed in PA as well, especially since there is no standard deduction.
  • WantWhatsBestWantWhatsBest Registered User Posts: 109 Junior Member
    No, he doesn't. He goes to a state school outside of PA.
  • mommdcmommdc Registered User Posts: 11,137 Senior Member
    edited March 7
    Ok, did you find out if that state taxes scholarships?
  • WantWhatsBestWantWhatsBest Registered User Posts: 109 Junior Member
    It is not -- and interestingly, if he had to file a state tax return in that state (he does not; he's a resident of PA), he'd be able to deduct the portion of the scholarship that was taxable on federal. Or something like that. This from my tax guy. We have reciprocity with this state, so everything goes through PA. Great question, though.
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