Who determines what an outside scholarship pays for?

Paying for College
1

<p>This is a tax related question, but here goes.</p>

<p>D received a $2500 outside scholarship that was sent to her for her to sign and forward to the school. On the school’s billing record, it is listed as a credit and is not specifically designated as paying for tuition, room, board, computer, or some required fees. In addition there are fin aid credits. Can I decide that the $2500 paid for tuition so that there is no tax liability for my D?</p>

<p>Note: the credits did not cover all of the expenses.</p>

2

<p>Since money is fungible, your question is simply a matter of accounting. If your D’s “balance sheet” shows some outside money paying for things such as a place to live and food to eat, then that portion is taxable. Unless she is also making a significant amount working, these small amounts will not incur a significant (if any) tax liability.</p>