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Scholarships and taxes??

muselymusely Registered User Posts: 20 New Member
Hi, I'm a freshman who's about to file my taxes, and I'm really confused as to how to claim my scholarships. I had about $14k in outside scholarships, plus a $12700 merit scholarship from the school and a valedictorian tuition exemption. Cost of attendance was about $18k (Tuition, fees, books = $7018 + $845; Room and board = $7275; Misc = $3326).

So what is taxable and what isn't? I'm really confused and so are my parents. The school also told me they didn't have a 1098-T form prepared for me because I had grants/scholarships way above COA so I don't have to report anything to the IRS, but that doesn't sound right to me. I appreciate the help!
Post edited by musely on

Replies to: Scholarships and taxes??

  • entomomentomom Registered User Posts: 23,662 Senior Member
    I just went through this and got some great help on this board, this thread tells what how to do your taxes:


    You will need IRS publication 970, use worksheet 1.1 to determine the taxable amount of the scholarship (what should be reported on line 1 of the 1040EZ or line 7 on the 1040). What the college says about no 1098-T doesn't sound right to me either. My d had scholarships that were beyond the cost of tuition, fees and room and board, but still got a 1098-T. I'm assuming that your scholarships were paid to you via the school, so I'd suggest printing out your college billing statement so that you have some record of the scholarship monies coming in and the charges for tuition and fees.
  • swimcatsmomswimcatsmom Registered User Posts: 15,699 Senior Member
    OK - first the caveat - I am not an accountant or tax expert. But my understanding of the taxable scholarship rules.

    The IRS publication with the rules is IRS publication 970. There is a link to it here:

    The part relating to taxable scholarships/grants is:
    1. Scholarships, Fellowships, Grants, and
    Tuition Reductions . . . . . . . . . . . . . . . . . . . . . .pages 4 to 6.

    The school must provide you with a 1098T - their reasoning for not doing so is nonsense as having scholarships in excess of tuitionfees/books (let alone COA) is exactly what makes them taxable. You were talking to someone who was misinformed. Ours came from the bursars office - talk to them.

    Scholarships (including the tuition exemption) up to the amount of tuition/fees(that are required for all students so not things like parking fees) and books (required books) are not taxable. Anything above that is taxable.

    So you take the scholarship and tuition exemption dollars recieved during 2007. Subtract from that the cost of tuition/fees/books paid in 2007. The remaining balance is taxable income.
  • muselymusely Registered User Posts: 20 New Member
    Thanks for the information! But quick question...how do you calculate the cost of books to subtract from taxable scholarship income? Do you actually need receipts to prove you bought the books? I bought several of mine from a friend because it was way cheaper than going to a bookstore, but of course there's no documentation for this.
  • csleslie51csleslie51 Registered User Posts: 1,172 Senior Member
    Careful with cost of books if you are claiming the Hope Credit:
    From IRS publication 970:
    "Example 2. Donna and Charles, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year
    classes. The college has no policy about how students should obtain these materials, but any student who purchases them from College W’s bookstore will receive a bill directly from the college. Charles bought his books from a friend, so what he paid for them is not a qualified education expense. Donna bought hers at College W’s bookstore. Although Donna paid College W directly for her first-year books and materials, her payment is not a qualified expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution."
  • FredFredBurgerFredFredBurger Registered User Posts: 1,425 Senior Member
    I wouldn't file the taxes.
  • thumper1thumper1 Registered User Posts: 63,930 Senior Member
    Go to www.1098T.com. You can check to see for sure if you have a 1098T on this site. You will go to "access my account" (or something like that). From there, just type in the appropriate info. If you do have a 1098T, you can print it out. If not, I agree...call the Bursar's office and ask for one.
  • muselymusely Registered User Posts: 20 New Member
    So when I'm figuring out my taxable income from scholarships, do I have to include the merit scholarship that I received from the school for being a National Merit finalist or do I just need to total up my outside scholarships and then subtract qualified expenses?

    Thank you so much to everyone for their help!
  • swimcatsmomswimcatsmom Registered User Posts: 15,699 Senior Member
    All scholarships. In fact we had to add up scholarships and pell grant and ACG. It seems funny to me that my daughter gets a need based grant like pell then has to pay tax on it.

    Your question about the books is a good question. I don't know the answer. The books my daughter had first semester were from a book store so we had receipts. She did buy 2 for 2nd semester from friends. I am keeping track of them in a spread sheet I have set up to keep track of all this stuff and will hopefully have decided by this time next year how to handle them.
  • entomomentomom Registered User Posts: 23,662 Senior Member
    About the books you bought from a friend, how about writing up a bill of sale? Just list the date, buyer, seller, items purchased and prices, have your friend sign it and keep it in your records.
  • jerzgrlmomjerzgrlmom Registered User Posts: 1,245 Senior Member
    musely, my son had the same problem this year. His college didn't provide him with a 1098T, while my daughter got one from her school. My d's scholarships are less than tuition, so we used her info for a credit (not eligible for Hope credit since she's a junior). My son's school, Brown University, told us they do not provide 1098s if you received more than tuition (he had a bunch of outside scholarships in addition to Brown money). We called and spoke with several people at the school. All said the same thing. THey reason that it's only used for the tax credit, which clearly he isn't eligible for. They seemed confused when we said he needed it to pay taxes on some of it. But, they did go line by line through his bills to help me figure out the qualified expenses. Unfortunately it was just tuition and one small fee - they said the other fees, such as the health fee, aren't considered qualified expenses. They are for his personal benefit, not an academic need or something. I questioned this since these fees are REQUIRED for all students. Doesn't matter. They don't get included on the 1098T for those students who do receive them. He charged his books to his Brown account, so we had a record of those as well, but were told those didn't qualify either. I believe the rule is that you must be required to buy the books and buy them only at that one bookstore. If students are allowed to purchase them elsewhere (like online), then they can't claim them as qualified expenses. We didnt' want to take a chance for such a small amount of money, so we went with what we were told. My daughter's school also didn't include some of the fees or books in their 1098T.
  • entomomentomom Registered User Posts: 23,662 Senior Member
    We had the same experience as far as what the school considered qualified tuition and related expenses. My D did get a 1098T from her school even though it was higher than the COA and she had her billing statement from the college. The only things they counted as qualified expenses (Box 2) were tuition and the registration fee. She didn't have any lab fees the first semester, so I'm not sure if those would have been counted, but all of the other misc. fees did not.
  • zixxazixxa Registered User Posts: 106 Junior Member
    Even if everyone is required to pay a fee, if the fee is primarily for the benefit of the individual student, it doesn't count as qualified. A health fee is primarily to make sure each individual student can use health center so IRS won't count as qualified. A student activity fee funds things like newspaper, etc for all students as opposed to services for individual students so it can be qualified depending on how the university uses the fee.

    Lab fees would be tax deductible because required of all students as part of the class and lab space, etc can only be provided by the university.

    Universities use IRS regulations to determine which of their fees are qualified and that determination goes for all students at the universities. So, bursar offices should be reliable for determining what is qualified fee for that particular university.
  • muselymusely Registered User Posts: 20 New Member
    Well, I was taking a more careful look at IRS Pub-970 since my university still refuses to give me a 1098-T (apparently they're not required to if scholarships go beyond cost of attendance, which I think is pretty stupid since we still have to pay taxes on that excess, but whatever) and I noticed different wording about books being qualified expenses when it comes to figuring tax-free scholarships and the Hope credit (which obviously I can't claim):

    Qualified education expenses: For purposes of TAX-FREE SCHOLARSHIPS and fellowships, these are expenses for:

    • Tuition and fees required to enroll at or attend an Athletic Scholarships
    eligible educational institution, and
    • Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. These items must be required of all students in your course of instruction.

    For the HOPE CREDIT:

    Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance.

    So does that mean for the purposes of figuring out what is qualified education expenses for tax-free scholarships, I can include my books since it doesn't say anything about requiring those books as a condition of enrollment, only that they are required for the courses I am taking? Thank you so much your help, I appreciate it =)
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