1098??? Help!

<p>hi, I'm a freshmen in college and I was fortunate enough to receive a grant from the college I attend that covers most of the COA (tuition+books+room&board+personal expenses+travel). In other words, I receive more than just tuition and book expenses. </p>

<p>I was mailed a 1098 form today and I am so confused. Why does the grant qualify as income??? I got assistance because my family is extremely low income, and it's not like I was physically handed the money...as a freshmen I was required to live on campus and use the meal plan, which means that I got a deduction on the bill from the college. So I never got the money, I just paid less, and now I have to pay taxes for it?! I don't have the money! and this is stressing me out very much. </p>

<p>I am the oldest, so my parents have no experience with this either. </p>

<p>Please, help. :(</p>

<p>My son is in a similar situation. Yes, the amount you received in scholarships above the amount for qualified expenses (tuition, fees, books) is taxable. Think of it this way, even though no one handed you the money, in effect you were handed the money and then it was used to pay for your college costs. If another family had a student receive a scholarship that only paid for tuition, fees & books, and the family paid the room & board fees with their own money, that money would have been taxed when they earned it. It is only reasonable that what was money (in effect, if not in physical reality) paid to you to pay for room&board would be treated the same way.</p>

<p>Now, just so you don’t waste much time being disturbed about it, you are probably in a very low tax bracket and so the tax on that money won’t be very much. I do my son’s taxes for him, and he always has some tax withholding already taken out from his summer job. If that was his only income, he’d get a refund for that tax withheld. However, since his scholarship is also “income” he ends up owing some tax each year. The IRS keeps what was already withheld, and then I pay up the difference to satisfy his tax due. It usually ends up being in the $150 range.</p>

<p>It is a pittance compared to the amount of “money” he’s receiving from the college.</p>

<p>But yes, you do have to pay it. In a few states (mine, for example) they let him disregard <em>all</em> scholarship funds for purposes of state taxes. That might be something to check where you live. Although, I think the norm is that states will count that as income too, so you may owe some state tax as well as federal.</p>

<p>Incidentally, your parents can likely get a generous amount of tax credit for the money they contribute towards your college costs. It will far exceed any taxes you end up owing. They could use a little of that tax credit to pay any taxes you owe. That’s what I do.</p>

<p>They should claim the education tax credit for you. You should declare the scholarship “income” on your own tax return. This will very likely end up being the most advantageous way of doing it.</p>

<p>bump ?</p>

<p>You received a very thorough and complete answer. Is there something more specific you are looking for? This thread is the parent’s forum is discussing the same thing:</p>

<p><a href=“http://talk.collegeconfidential.com/parents-forum/1078889-received-form-1098-today-we-taxed-scholarships.html[/url]”>http://talk.collegeconfidential.com/parents-forum/1078889-received-form-1098-today-we-taxed-scholarships.html&lt;/a&gt;&lt;/p&gt;