Can anyone knowledgeable suggest how to roughly calculate what the expected tax burden would be for a full-ride undergraduate scholarship that funds both direct and indirect costs, when parents are in the highest tax bracket? Child’s actual earned income (from employment) would be in the $3k range.
Thanks!
I asked AI for you - I’m also interested in the answer 
But try Chat GPT or Grok and enter your income and actual numbers etc for a more precise answer. I used the highest income rate for you for the worst case scenario. Congrats on a full ride!
Final Rough Estimate
Assuming a $50,000 full-ride with $15,000 taxable (room and board), and $3,000 earned income, the child’s tax burden is around $4,800. The parents, being in the highest bracket, don’t directly pay this, but the kiddie tax pegs most of the unearned income tax to their 37% rate. The child must file a return since total income ($18,000) exceeds the filing threshold for dependents with unearned income (around $1,350 in 2025).
I believe the taxable portions of the scholarship are closer to $20k (if the tax-free portion only includes tuition and fees?)
See pub 970 for explanation of scholarship taxation, qualified expenses, etc.:
If total scholarship minus qualified expenses (tuition, books, fees) is 20k:
20k + 3k earned income - 15k standard deduction= 8k taxed at parent marginal rate due to kiddie tax. State taxes might come into play also.
Ty for explanation!
Yes, I strongly recommend considering a deductible IRA for the whole $3K earned income since it will be deductible from federal and state tax at the parents’ marginal rate. Convert it to a Roth after graduation.