New Tax law on Taxable scholarships

[BelknapPoint]

Having read this entire thread, is the question still outstanding as to whether or not students who are on full-ride athletic scholarships at schools that normally charge more than $12,000 for the R&B portion, will starting in 2018 find this amount to be taxed at the trust rates?

Separately, for students earning a scholarship equal to, but not designated/stipulated for tuition only, but paying for their fees/books themselves (non-taxable QEE’s), as well as their R&B (not a QEE), in prior years it was advisable for the student to consider a portion of their scholarship/grant to be taxable, so the parent could claim the AOTC. Is this still the case for 2018? As I recall it, it is generally worthwhile claiming up to $4000 of the scholarship as taxable, because a child’s tax on $4k is much lower than what the parents can deduct as a credit.

Your post revolves around the kiddie tax. Taxable scholarships are considered unearned income for the purposes of the kiddie tax. Starting in 2018, unearned income taxed under the kiddie tax will be subject to the rates used for trusts and estates. Generally, the first $1,050 of such income is not taxed because of the standard deduction taken by those who are claimed as a dependent on someone else’s tax return. The next $1,050 of such income is taxed at the child’s rate. Anything over that is taxed using the kiddie tax. For 2017, that means using the parent’s highest marginal rate. For 2018 on, that means using the rates for trusts and estates.