Taxes and College

<p>My daughter is in her freshman year at college. I usually do our taxes using TurboTax. We have W2's and use the standardized deduction. We don't itemize. Am I going to be able to do our taxes? Does TurboTax walk you through everything or should I hire it done by a professional?
We will claim my daughter as a dependent and she will file her own tax return indicating that someone else is claiming her as a dependent. She received $6000 in various scholarships. She received checks that amounted to $2250 written to her and we deposited into her savings account, the remaining scholarships were sent directly to the school she is attending. Do we claim this or does she claim it? I have a co-worker that works for H&R Block and she says if we claim her as a dependent then we have to claim this scholarship money on our tax return and not our daughter's tax return. Is this right? I don't mind if we have to do it, just trying to figure out if that is correct information. My co-worker says if we don't claim this then we can't claim any education credits on our return. Thanks for any information.</p>

<p>Turbo Tax software should be able to handle things just fine......just answer the questions. BTW.....not all scholarships are taxable. All of the scholarships my kids have earned have fallen into this category. If the funds are used for tuition or fees they are not taxable, but if used for room and board they are.</p>

<p>More info here.....</p>

<p><a href="http://www.irs.gov/individuals/students/article/0,,id=96674,00.html%5B/url%5D"&gt;http://www.irs.gov/individuals/students/article/0,,id=96674,00.html&lt;/a&gt;&lt;/p>

<p>Scholarships/grants must be reported on your daughter's return (doesn't matter how they were paid). IRS Pub 970 will show you that the qualified expenses (tuition, mandatory course fees, required books/supplies) can offset those scholarships. Or she can choose to treat them as having paid non-qualified expenses. You, the parent, have several options but the American Opportunity Tax Credit is the first one to look at if she has qualified expenses that she did not use to offset her scholarship/grant aid.</p>

<p>This thread from last year might help:
<a href="http://talk.collegeconfidential.com/financial-aid-scholarships/1076108-american-opportunity-tax-credit-scholarships.html%5B/url%5D"&gt;http://talk.collegeconfidential.com/financial-aid-scholarships/1076108-american-opportunity-tax-credit-scholarships.html&lt;/a&gt;&lt;/p>

<p>I do my own taxes with Turbo tax and found the financial aid, scholarships, 529, qualified, non-qualified, and tax credit figuring daunting but doable. IMO, everyone should do their own taxes and if needed, bring it to an accountant for checking. If I'm going to sign a legal document, I need to make sure I understand what is on it. Also, don't assume a tax prep professional knows how educational expenses work. I've had some bad advice that I researched and knew not to take that advice.</p>

<p>Scholarships/grants must be reported on your daughter's return (doesn't matter how they were paid). IRS Pub 970 will show you that the qualified expenses (tuition, mandatory course fees, required books/supplies) can offset those scholarships.</p>

<p>So, if your D's scholarships are equal to or less than the cost of tuition, course fees, and books, then she won't pay taxes on them.</p>

<p>Also, even if your D's scholarships exceed tuition, etc, if she doesn't earn much, then that amount may not actually get taxed by the feds. I don't remember what the threshold is, but kids can have a certain amount of income and pay no fed taxes at all. State taxes will vary by state.</p>

<p>sk8rmom....my kids' undergrad only reports the scholarships that exceed tuition/fees. Is that unusual?</p>

<p>Auugggh! Yet another learning curve. Daughter is fortunate recipient of a full ride (less books and materials). Had heard that her R & B fees paid by the scholarship are considered taxable; other than that, she has only a small amount of income earned as a performer last summer. Dad wants to gift her some money toward her future...said he's heard she can receive gifts of up to $6000 untaxed (don't know where he got this figure)....does her scholarship (which is greater than $6000 in the non-tuition portion cancel this out? </p>

<p>We have always been a Turbo Tax family...but this year sounds super-complicated....</p>

<p>I used TurboTax last year and it made two mistakes on my taxes. I caught one and fixed it before I sent it in, but I did not catch the other. It was on my daughter's state tax return and resulted in additional tax being owed. I personally am looking for something else to use this year.</p>

<p>We also use tax prep software in this house. Some years our taxes have been a bit more complicated than other years (like the years DH worked in two states...). I can't see any reason why you shouldn't be able to do this as you have in the past, using the tax prep software. </p>

<p>You will get a 1098 T for your daughter's college money...it will tell you everything you need to know. BUT just make sure it is for the calendar year 2011 and not the school year 2010-2011. It should be for calendar year 2011.</p>

<p>The amount your daughter will have to pay for taxes for her room/board scholarship will be a drop in the bucket compared to the actual COSTS of these items. Congratulations to her for this wonderful award.</p>

<p>mommafrog.....</p>

<p>An individual can gift up to $13000/yr. tax free. You and your husband can each do that....so in theory combined you could gift up to $26,000 to your daughter without any federal tax consequences. The $6000 in the non-tuition portion of the scholarship has nothing to do with this. You can gift your daughter $$ if you want and there will be no tax consequences.....in fact, you don't even have to report it.....just keep track of it in your records.</p>

<p>What is the amount a student can earn without owing fed taxes? For some reason, I'm thinking it's around $5k...plus or minus. Is that right/close?</p>

<p>Was $5700 ... not sure for 2012. Don't forget state taxes, too. Our state requirement is lower than the federal requirement.</p>

<p>The 2012 federal standard deduction for singles is $5,950</p>

<p>In</a> 2012, Many Tax Benefits Increase Due to Inflation Adjustments</p>

<p>$5800 for 2011 tax year (as long as any unearned income is not over a certain amount - taxable scholarships/grants are considered earned income for this)</p>

<p>^^^</p>

<p>Ok....so if the amount is 5800...then, does that mean that the first 5800 of scholarships (non tuition/fees/books) wouldn't be taxed, either? But, taxable scholarships and/or job earnings in access of that 5800 would be taxed?</p>

<p>
[quote]
I have a co-worker that works for H&R Block and she says if we claim her as a dependent then we have to claim this scholarship money on our tax return and not our daughter's tax return.

[/quote]
Another reason not to use H&R Block</p>

<p>Scholarship money is only taxable to the extent it exceeds qualified tuition and fees, and then it is taxed on the student's return.</p>

<p>I used TurboTax for about last 10 yrs.
I'm pretty sure it helped us get all the college stuff right for DS, including undergrad and grad school. It did get more complicated when he attended school and worked two years in state other than that of residency and ALSO worked in home state as well.</p>

<p>TT always prompted me to imput college expense stuff and then calculated the 'best' tax savings option based on our situation. some years it was tuition and fees deduction, other years it was a credit (can't recall what it was called).</p>

<p>You can do this!</p>

<p>In order to get the TAX credit for any money you paid (which sounds like basically nothing), you would have to declare her on your taxes.</p>

<p>BUT any taxable income from her scholarship (as noted above) would be on HER return...not yours.</p>

<p>
[quote]
You can gift your daughter $$ if you want and there will be no tax consequences.....in fact, you don't even have to report it.....just keep track of it in your records.

[/quote]

If you are required to fill out the FAFSA as a condition of the scholarship, and if the scholarship can change as a result of changes from year to year on the FAFSA, you need to consider that gifts of money to the student need to be reported on line 44j (Money received, or paid on your behalf (e.g., bills), not reported elsewhere on this form.)</p>

<p>Granddad might want to wait if this is the case.</p>

<p>Gifts are never taxable to the recipient. Gifts over a certain amount will, for most people, come out of your lifetime exemption for gifts (which is currently $5 million) and likely lead to no tax consequences for the giver either.</p>

<p>*I have a co-worker that works for H&R Block and she says if we claim her as a dependent then we have to claim this scholarship money on our tax return and not our daughter's tax return. </p>

<p>===========</p>

<p>Another reason not to use H&R Block</p>

<p>*</p>

<p>lol....</p>

<p>If this were true, then if a parent claims a child on his taxes, then a parent would also have to claim the earnings from the kid's part-time job as well.....not.</p>

<p>Good Lord - your coworker is completely wrong on this, does she really work for H R Block? That's a bit scarey. You absolutely can claim your daughter as a dependent on your taxes. You will get the dependent exemption of $3700 and can claim any education tax credits you are eligible for. She can file her own taxes and will get the standard deduction of $5800 but not the personal exemption of $3700. Any income she has, including taxable scholarships/grants, should be declared on her return, not yours.</p>