Byrd scholarship designation question

[DMom123]

<p>DS is a freshman. We are trying to understand 1098T, tuition/fees, grants/scholarship and AO education credit.</p>

<p>Is Byrd scholarship designated as a tuition and qualified expenses only? I’ve been searching and can’t seem to find this information anywhere. Do you know where I can find it?</p>

<p>Thanks!</p>

[entomom]

<p>The Byrd scholarship should be added to the grant money (box 5) on the 1098T. At least that’s the way it works at D1s school, it isn’t included with Institutional grants on the 1098T.</p>

<p>For the education credit, you first have to total all grants/scholarships and total all qualified educational expenses (tuition, fees and required books). When you subtract grants/scholarships from QEEs, whatever is left over can be counted towards an educational tax credit. Note, expenses for R&B, travel, non-required supplies, etc. are not considered QEEs for Fed taxes.</p>

[mathmomvt]

<p>I’m not 100% clear what you’re asking, but if you go here: [2008</a> CFR Title 34, Volume 3](<a href=“http://www.access.gpo.gov/nara/cfr/waisidx_08/34cfr654_08.html]2008”>http://www.access.gpo.gov/nara/cfr/waisidx_08/34cfr654_08.html) and click on “How does an SEA disburse scholarship funds?” it says:</p>

<p><a href=“b”>quote</a>(1) The SEA shall ensure that the
total amount of financial aid awarded
to a scholar for a year of study does
not exceed the total cost of attendance.
(2) The SEA shall ensure that loans
are reduced prior to reducing a scholarship
awarded under this program.

[/quote]
</p>

<p>So it appears that this scholarship is allowed to be used for expenses other than just tuition, but only within the COA of the college. The amount of total scholarships and grants that exceeds the qualified expenses would be taxable, I believe.</p>

[entomom]

<p>

The amount of total scholarships and grants that exceeds the qualified expenses would be taxable, I believe.

</p>

<p>Yes, this correct, but it counts as income for the student, not the parents (if the student is a dependent). </p>

<p>The Byrd is a scholarship, and is treated like any other Institutional or Outside scholarship for tax purposes.</p>

[swimcatsmom]

<p>Unless a scholarship or grant specifically says it must be used for tuition and fees, you can choose whether to pay tuition and fees with it (making it non taxable) or whether to pay non qualified expenses with it (making it taxable). IRS 970 even shows an example of doing it both ways.</p>

<p>

Example 1. Joan paid $3,000 for tuition and $5,000 for room and board at University X. The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan.
The terms of the scholarship state that it can be used to pay any of Joan’s college expenses. Because she applied it toward her tuition, the scholarship is tax free. Therefore, for purposes of figuring an education credit (American opportunity or lifetime learning), she must first use the
$2,000 scholarship to reduce her tuition (her only qualified education expense). The student loan is not tax-free educational assistance, so she does not use it to reduce her qualified expenses. Joan is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship).
Example 2. The facts are the same as in Example 1, except that Joan uses the $2,000 scholarship to pay room and board, and, therefore, reports her entire scholarship as income on her tax return. In this case, the scholarship is allocated to expenses other than qualified education expenses. Joan is treated as paying the entire $3,000 tuition with other funds and can figure her education credit on the entire $3,000.

</p>

[DMom123]

<p>Thank you! Very helpful replies. I went back and checked the award letter too. It did not say the scholarship must be used for tuition and fees.</p>