TAX implications of MERIT awards

Scholarship or grant money used toward tuition (and other qualified expenses) is tax-free. If the scholarship is unrestricted, and used for other expenses (toom & board, transportation, etc) it is taxable, and generally considered to be unearned income. It would not fall within the $12,000 standard deduction, because a dependent calculates the standard deduction based on earned income. Thus it would be taxable, and unfortunately would fall under the “kiddie tax” rules.

There are multiple definitions of “qualifying expenses” depending on the source of money (529, dependency, tuition credits, etc). Most of this is spelled out pretty well in Publication 970, but if you have any doubts, consult a tax preparer or a CPA that is familiar with tax law - and who is up to date on the changes for tax year 2018. Not all CPAs focus on taxes, and Enrolled Agent (tax preparer certified by the IRS) is likely to be your best bet.