Room and Board is not a qualified expense for scholarships. Only tuition and some required fees and expenses. Any portion of the $2500 not offset by qualified expenses is taxable.
Not trying to pry into your tax situation, but just don’t want folks to have the impression that qualified expenses include R&B.
Got it.
All I know is when I do the 1098-T, let’s say Turbo Tax, b4 checking the hidden box - if I started at - for example $1k owed and it goes to $2k owed after entering the 1098-T, it goes back to $1k after checking the box.
Whatever turbo tax says I do.
Crazy if anyone’s room and board are taxed. Even need aid ??
A room and board scholarship is treated as earned income, and that’s subject to the $14600 standard decision for single filers in 2024. So, depending on a given student’s specific situation (whether they have other earned income, are dependents, parents are taking aotc, etc.,) they might not have any tax due on the room and board scholarship.
This is another helpful publication: Topic no. 421, Scholarships, fellowship grants, and other grants | Internal Revenue Service , along with Pub 970 that politeperson posted above.
odd - the 1098 T is to my wife and I and goes on our taxes, not my kids…at least as i do it. i think it might go on hers too - i forget. will find out in two months when i do the taxes. Def on mine tho.
AFAIK, any non-QEE scholarships (e.g., room and board) is earned income for the student, not the parents. That’s how I read topic #421 @belknappoint?
ETA: some may find this IRS questionnaire helpful: Do I include my scholarship, fellowship, or education grant as income on my tax return? | Internal Revenue Service
I dunno - Turbo Tax asks if we got a 1098 T. I’ll look at last year’s when i get home. Maybe it is just for my kid.
I think it is. I’ve confused on mine - with the 529 form I get. That adds taxes - til I check the right box.
Frankly, it’s all confusing - but i set it up at the end that no one pays any taxes. I just have to find the right box.
Taxable scholarships are treated as earned income only for the narrow purpose of calculating the standard deduction. Otherwise, they are treated as unearned income and thus potentially subject to the kiddie tax.
Apologies to OP if I’ve derailed the thread with this issue but it did seem relevant that a “full ride” has tax consequences.
So the part of the $2500 that is for books or fees is considered qualified and not taxable. If it’s used for rent or food, it is taxable. It’s treated as earned income for the standard deduction and unearned for the Kiddie Tax line. I’m not sure what you are getting fixed on Turbo Tax. If the student is 24 or over, Kiddie Tax doesn’t apply. And if the student earns more than half their support, it doesn’t apply.
Correct. Any taxable scholarship is reported on the student’s return, never the parent’s return. And as already noted, taxable scholarships are treated as earned income only for the purpose of calculating the student’s standard deduction. Taxable scholarships are treated as unearned income whenever the kiddie tax (IRS Form 8615) comes into play.
The scholarship is weird. It’s earned income for the standard deduction, but unearned for the Kiddie Tax (form 8625). So if my kid had a summer job and made $8k and he had $12k in non-qualified scholarships. His taxable income is then about $6k. His tax liability is about $1400 because he ends up taxes at my rate, not his own rate. He’d have a tax liability of $600 without the scholarship. I pay it for him, since he’s saving us thousands with the scholarship.
The form 8615 is done regardless of whether they are dependents, I believe. And it makes it hard to shift scholarships to taxable, like is often recommended, for the AOTC because it’s taxed at my rate and not his. We do save some if we shift $2k, but after that, we lose money.
I’d love to know what box you are checking that makes it go away. I’d be thrilled to find that box!
The 1098-T should be sent to (addressed to) the student. You may be reporting student 1098-T information on your tax return if you are claiming an education tax credit based on the education expenses of the student to whom the 1098-T was sent.
Turbo tax always adds tax but I play with the boxes and get it removed.
Turbo tax has issues. Maybe it’s not doing right. I don’t use it for state returns. It’s long been wrong. So now I do my kids state taxes by hand.
Anyway, it’s all good. Best I can tell we’ve not paid taxes on merit aid. And of course not on 529 although initially it adds a tax and removes later.
As long as the taxable portion of any merit aid plus other student earned income is less than the student’s standard deduction ($14,600 for single filers in 2024), it makes sense that the student (not you) has not paid taxes on the merit aid.
Thanks for that helpful clarification!
Yes. If total income exceeds as noted by @BelknapPoint and @Mwfan1921 .
You can’t make this go away by clicking a box on Turbo tax.
That’s not us. But for high need kids - hmmmm but most likely don’t earn $14.6k.
It’s not JUST what they earn. It’s what they earn plus what they are awarded via aid for non-qualified expenses.
@BelknapPoint @Mwfan1921 am I correct?
ETA…the amount they likely owe in income taxes is low compared to the amount of aid they are receiving. As noted in the example above.
Is this true when the aid is never received in the form of payment to the student, but is rather just internally deducted from expenses by the university? In this sense, there is no income, just a lack of expense. Is it still taxable in that case?
Yes, you are correct. Scholarships/grants, including need-based aid, that pays for room and board is treated as earned income for the purpose of figuring a tax dependent’s standard deduction.