Taxable scholarships determination

Parent Cafe
1

<p>The following numbers appear on 1098-T from College. </p>

<p>Box 2 (amount billed for qualified tution and related expanses ) $33,572
Box 5 (Scholarships and grants) $33,100
Box 1,3,4,6,9 and 10 are empty
Box 7 and 8 are checked </p>

<p>Harvard has reported the outside scholarship in the bottom of the 1098-T attached form but the numbers does not appear in the 1098- Box. </p>

<p>If I add W2 9from summer internship job) and check if any deductions were made (taxes withheld)</p>

<p>Year 2007 Expenses
Tax deductible
Tuition - College $15,728 (fall and spring) - appear in Box 2
Student Services Fee 1,058.00 (fall and spring) - appear in Box 2
Total tax deductible Expenses $33,572</p>

<p>Looks like non Tax deductible (does not appear on 1098-T, In addition the transaction history does not show these on the attached form)</p>

<p>Blue Cross/Shield Health Insurance $681.00 (fall and spring)
Health Fee - $713.00 (fall and spring)
Undergraduate Council Fee $75.00 –
Is this deducible or not I am not sure Questionable expanses – 2863</p>

<p>These are definitely not tax deductible
Room Rent - College $2,927.50 (fall and spring)
Board - College $2,383.00 (fall and spring)
Total $ 10621</p>

<p>Income
Scholarship reported on 1098-T
Harvard Scholar grants $33,100</p>

<p>Scholarhip not reported on 1098_T but included in the Transaction History
Outside Scholarship $ 7750 (National merit, Robert Byrd etc.) </p>

<li>Other Deductible Expenses**
I bought a computer for $3500 (have a receipt for it) and total book expanses were around $700 dollars (I have receipt for it too)</li>
</ol>

<p>Based on your recommendation, I prepared a statement that lists the following:</p>

<p>Ist scenario:</p>

<p>Taxable Income =$33100+7750 = $40,850
Expenses =$33572+2863+4200= 40635</p>

<p>Net to be reported 2007 = $40,850-$40,635 = $215 </p>

<p>IInd scenario:
Taxable Income =$33100+7750 = $40,850
Expenses =$33572+4200= 37772</p>

<p>Net to be reported 2007 = $40,850-$37772 = $3078</p>

<p>IIIrd scenario:
Taxable Income =$33100+7750 = $40,850
Expenses =$33572= 33572</p>

<p>Net to be reported 2007 = $40,850-$33572 = $7278</p>

<p>Which scenario is correct? Thanks for your help</p>

2

<p>I have a similar but slightly different question - my son has received a 1098-T as well for his almost full ride. He was starting to work on his taxes and asked me if I was going to claim him as a dependent. How in the world do we figure out if he’s a dependent - in other words what counts as support and what doesn’t. As he’s away at school for 9 months of the year and has nearly a full ride I don’t pay for much of anything while he’s away and when he’s home I feed him(do I need to calculate a percentage of the mortgage & utilities as part of his support?). I would think I don’t provide more than 50% of his support but then I read on the IRS website that money from scholarships cannot be counted towards support (?). Did I read that correctly? DS has worked and he gets some money to help from his non-custodial parent as well. I have no clue how to figure this out. (and am even more frustrated and sidetracked by the fact that I’m on social security disability and once he turned 18 my disability income was reduced by 1/3 - so they can’t really expect that I still provide more than 1/2 is support on 1/3 less income can they?) Should I have been keeping track of what I spent for him over the past year? Thanks.</p>

3

<p>Disclaimer: I am not a tax accountant. The information below is ‘as I understand it’ and should be verified by the reader.</p>

<p>First of all, I believe you are using the term ‘tax deductible’ instead of ‘tax exempt’. Scholarship money used for tuition, certain fees required for enrollment, books and related required supplies for individual courses are ‘tax exempt’ to the student. Scholarship money used for any other purpose such as room, board, and other expenses are ‘taxable’ to the student. Also, the money spent on the computer is ‘taxable’ since it most likely was not required of all students in any particular course. Of course, any taxable scholarship amount will be added to the W2 amount. The student’s tax liability will be based on the taxable amount of scholarship money, earnings reported on the W2 and any interest or dividend income the student may have, etc.</p>

<p>Are you sure that the outside scholarship is not included in Box 5?</p>

<p>If total scholarship money does not cover all the ‘qualified’ expenses, you or you student may also be able to claim the ‘Hope Credit’ or the ‘Lifetime Learning Credit’. However, this cannot be used against money spent on Insurance, Medical Expenses, Room, Board, or other personal expenses. However it appears that, in you case, it does.</p>

<p>Here is the link to IRS Publication 970: Tax Benefits for Education</p>

<p>[Publication</a> 970 (2007), Tax Benefits for Education](<a href=“http://www.irs.gov/publications/p970/index.html]Publication”>http://www.irs.gov/publications/p970/index.html)</p>

4

<p>Just checked S’s 1098-T and his box 5 includes both institutional aid and outside scholarship $. I would double check to make sure that some institutional aid was not taken away due to the outside scholarship.</p>

5

<p>If the $7750 is not included in box 5, then total scholarship money is $33,100 +$7750=$40,850. Subtract from that the amount in Box 2 ($33,572) which would give you $7,278. (The amount in Box 2 should include any fees that are eligible to be tax exempt). From this you can subtract the amount spent on books and required course related supplies. This will give you the amount of taxable scholarship money that needs to be reported to the IRS.</p>

<p>Thus, your third scenario appears to be correct, except you can deduct the cost of books and required course related supplies from the amount.</p>

<p>Sorry, that the most expensive scenario appears to be the correct one.</p>

<p>You may want to contact Harvard to make sure what each box contains. Again, I am not a Tax Accountant and this info should be verified by the reader.</p>

6

<p>Health service fees and medical insurance premiums are not qualified expenses and therefore are not included in the “tuition billed” box. I called my D’s university and was told that the IRS does not allow inclusion of any health service fees in qualified expenses, even if they are mandatory. This is stated in IRS publication 970.</p>