<p>For 2010, what will be the college tuition tax credit. Some places I read $2500. Other sites say $1800. (And the $1800 only for the first two years of college).</p>
<p>And scholarships? Are they taxed as income? Some information I’ve read say that they are taxed as income if used for room and board but not if used for tuition. My D has a scholarship that just deducts money from a combined tuition and housing bill. If I indicate on our check for the balance that the money is for tuition, then is the scholarship money taxed as income?</p>
<p>I have twins starting college in two weeks and I’m new to this.</p>
<p>Scholarships and grants used for qualified tuition, fees and books are not taxed. Those used for anything else are. It may actually be more beneficial, if the scholarship allows it, is to consider it used for other things, and use the tuition (or at least $4,000) for the credit. The credit goes on the parent’ return, or the person claiming the student, whereas the income is taxed to the student.</p>
<p>Seems like its better to apply the scholarship to room and board. The tax credit for tuition paid is worth more than the extra income to be taxed, even if the student is taxed at the parent’s rate.</p>
<p>It may be - you have to run through the numbers for your own situation. I pay $2000 toward my D’s tuition, so I get the full $2000 tax credit for that (partially refundable). You only get $500 more credit for the next $2000 paid, for me that part is not worth it.</p>
<p>I think these rules were only for 2009 and 2010, I don’t know what will happen in 2011 though. Before 2009, the Hope credit was $1800, only for the first 2 years of college.</p>
<p>But because the taxable portion of scholarships is considered earned income, the first $5,700 is not taxable to the student. If the student has no other taxable income, or very little, it would probably still be better to take the entire $4,000 for the tuition credit and make it taxable to the student.</p>