<p>per semester its about 5000</p>
<p>Scholarships and grants (not loans) are $5000 more than tuition/fees and books a semester? If so then after a year of school you will owe some taxes on the taxable portions of scholarships and grants.</p>
<p>
Not if that’s all they have. But if they have unearned income or wages, they you should take another look.</p>
<p>My son filed taxes last year because we assumed he had to pay on his portion of scholarship used for room and board. Now I’m wondering if that’s the wrong thing to do. If I’m claiming him as a dependent, then should I be entering the 1098T amount on my tax filing? They really don’t make it easy to find simple answers to what to do with the 1098T. Exasperating!</p>
<p>No you did the right thing.</p>
<p>So say I had about $10,000 in scholarship/grant aid outside of qualified tuition and fees. About how much would I be expected to pay in taxes?</p>
<p>Edit: That’s assuming I have no earned income.</p>
<p>My son will have around 8,000 in taxable scholarship, and it looks like he’ll(we’ll) owe somewhere between $300–$500 for federal and state taxes. He also had no earned income. You can get on turbotax or H and R Block online and put in your numbers to see what you’ll owe, and you don’t pay anything unless you decide to actually file through them.</p>
<p>I’d also just add that if you are getting need based aid, the school will often ask to see the tax return --whether you owe or not.</p>
<p>
If you have $10K of taxable scholarship/grant income and you are claimed on someone elses return (probably your parents) then you would put $10,000 on line 7 of the 1040. Then you would subtract the standard deduction from that which is $5,700. That leaves taxable income of $4,300. The tax on that would be around $430. If you are not claimed on someone else return, you deduct an additional $3,650 as a personal exemption and you are taxed on $650 and the tax would be around $65.<br>
Assuming you have no other income of any kind including wages.</p>
<p>
I believe you simply put your income on the FAFSA and indicate that you are not required to file. I see no reason to have to file a return with no taxable income. Someone please correct me if I’m wrong.</p>
<p>
Please remember that the scholarships are considered earned income on the tax return. This is good because it means you get a higher standard deduction that if it were unearned.</p>
<p>I guess the thing that annoys me about this is I feel like I do pretty well with following the IRS instructions, because they have a form for EVERYTHING—but this, well you just have to guess where the amounts might go. My son gets a 1098T that lists all his scholarship money in box five. It then lists the payments received for qualified tuition and related expenses in box 1. It also has box 7 checked that says if the amount in box 1 or 2 includes amounts for an academic period beginning January-March 2010. What does that even mean?! I think there should be a basic form where you calculate your 1098T income and expenses. Do I just subtract what he spent on books? There’s nowhere to enter it. It really seems if they wanted students to file a tax return they’d make it a little less obtuse. I’ve run his numbers through both turbotax and H and R Block online and get completely different answers. Even they don’t know how it’s supposed to be done.</p>
<p>From experience: Turbotax does not handle education issues well. It may be because they are so darn complicated this year.</p>
<p>What I would do if I were you, is try and figure out for yourself what scholarships and grants your child received for 2009. Then subtract from that what qualified tuition, fees and books were paid for that same year. If the scholarships were higher, then that amount is taxable to the student. If the tuition, fees and books are higher, that amount is available for the tuition credit for the parent.</p>
<p>As long as you use the same method every year: either directly from the 1098T or your own records, you will be fine after the four years.</p>
<p>Somewhat related to this thread:
I remember that the money distributed from the 529 plan could be used for room and board without paying tax. Am I correct?</p>
<p>If the 529 distribution is $7100 and the room and board is $10000, do I owe any tax? Where can I report this on Turbo Tax or some IRS tax form?</p>
<p>Yes if the distribution was used to pay for qualified education expenses (which for 529 accounts includes room and board) then there is no tax liability. 529 account distributions are one of those distributions you only report on your tax return when there is a tax liability (ie if they are used for non qualified expenses.) For instance on the tax program I use it asks for any taxable distributions and you have to figure out if any of it is taxable by looking at the rules. IRS 970 has the rules. Just make sure you keep in your tax files what the money was used for so that is the IRS asks you can show them.</p>
<p>swimcatsmom: Thanks.</p>
<p>I did not enter my 529 distribution into Turbo Tax and felt like committing a tax fraud. Now that I learn from you (“the CC tax expert” :)) that “529 account distributions are one of those distributions you only report on your tax return when there is a tax liability (ie if they are used for non qualified expenses.)” I feel much comfortable.</p>
<p>A problem for a novice is that not all qualified education expenses are defined the same. For scholarship, it is defined in one way, but for 529 distributions, it is defined in another way.</p>
<p>It seems like it would be a good idea in cases like these to pay an accountant for an hour of his/her time. We have an accountant because of our home business, and he has to stay on top of all of these kinds of issues. It’s a lot cheaper than getting in trouble with the IRS down the line.</p>