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ways to use NMS money?

rachelmonsterrachelmonster Registered User Posts: 7 New Member

I got the letter detailing the when and how of the "stipend" (mine is a college-sponsored scholarship? I don't know if it makes a difference) but it was pretty unclear on the topic of what, exactly, you can put the money towards (without it being subject to federal income tax). It says in the letter that tax-exempt expenses are: tuition and enrollment fees and "books, supplies, and equipment required for course-related instruction."

My question is: what does "books, supplies, and equipment required for course-related instruction" mean, exactly? Does it mean strictly textbooks, school supplies (ie pens, notebooks), stuff like lab goggles or canvases for an art class, etc? Or can it be taken more liberally, meaning the money could be used for, say, a new computer? How do they know, anyway?
Post edited by rachelmonster on

Replies to: ways to use NMS money?

  • ZombieDanteZombieDante Registered User Posts: 3,895 Senior Member
    I say as long as you can justify that it is for an education purpose (and no nude pics lol) then I think you can use it for anything.
  • SteveCSteveC Registered User Posts: 727 Member
    The key phrase here is "federal income tax." Your question is answered in IRS Publication 970:


    In particular, see Table 1-1 on page 4. Tuition is the only thing that is absolutely tax free. Fees, books, supplies, and equipment may be tax free. The standard is "if required of all students in the course." Safety rules require everyone to buy the goggles, so they're tax free. Unless a college or course requires everyone to buy a computer, it's not going to be tax free.

    A little surprising to most (me included) is that room, board, and travel are not tax free under any circumstances. Still, in the typical college student's tax bracket, what will you owe?

    How do they know, you ask? They won't ... unless you're the lucky winner of an IRS audit. Then, it's up to you to show them what you spent it on. I don't know if I'd lose too much sleep worrying about an audit, though. They have bigger fish to fry.
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