–It would be easier to navigate. I understand from reading these pages if a student recvs more money in grants and scholarships (box 5, 1098 T) than are included in required college costs such as tuition fees (amt billed in box 2) and books, that this amt is taxable to the student.
So why not give us a 1099 to put in the income spot in the 1040?
So absent this , how does one report this taxable income? I think I read that you are supposed to put the ther letters SCHL or some such in wage line prefixing the taxable amt from scholarships/grants. But w/o a specific number from a 1099 form as is usually the case for all taxable income, this seems cloudy and confusing at best and fraught with error at worst.
My idea of taxes is putting Box X into the tax prep tool and being done with this. In my case for my son, who recvd a NEED BASED tuition and r and b scholarship-grant, it looks like there wd be $12k of grants over and above the billed amt.
So that would mean that my son would need to a) file a tax form (as it exceeds the $5k minimum) and b) come up w/ whatever the taxes are on $12k.
[side comment: It is ironic that an indigent person would have to come up w/… $1,200-2,000? for taxes when the only reason they recvd the “100 pct” COA is that they did not have enough money - were needy. ]
The college is required to send Form 1098-T, which will show tuition and fees paid and scholarships received.
I am not one of the tax people here and I can’t answer your title question however: it isn’t just about the billed amount. Room and board are taxable. But along with tuition and fees include:
REQUIRED course-related expenses (e.g., fees, books, supplies, and equipment)
non-required expenses (computers, travel, etc.) are not exempt.
http://www.finaid.org/scholarships/exemptions.phtml
The taxable amount can vary if the parents paid anything toward books and/or tuition and they choose to take the AOTC.
Dragonfly has a good point. Schools don’t know book and supply expenses.
Schools also don’t necessarily know when parents paid the QEE, only when they billed it. Dropping a check in the mail on December 28 means you paid in the tax year of December. But the school may not get the check until January or may not credit it to the account until January. The tax year of a payment is when you mail a check or when you make the charge to your credit card or whatever, not when the school receives it or credits it to the account.
That’s why schools are allowed to use Box 2 of the 1098T and only report expenses billed, not expenses paid.
1099s and 1098s have different purposes. 1099s also report to the IRS that certain payments were made to the SSN. 1098s are just information, that the school billed a certain amount and credited a certain amount, but not that any of that was income, taxable, perhaps a credit is available. Just information. Many many people get 1098s and it is of no tax consequence either way, nothing is taxable and nothing indicates a credit. Mortgage interest, refunds, etc are reported on 1098s because there is no deduction for the business issuing the 1098. Information only.
If a 1099 is issued, the IRS is looking for it to show up on a return somewhere. The business is taking a deduction, and the IRS wants to see someone paying a tax on it.
I’d LOVE for my son to have this problem!!
thanks for the info. It was helpful. another question on 1098 numbers. How would one calculate the taxable grant amt for 2014 proper? Subtract the billed amt (box 2) from the credited amt (box 5) and then divide by two?
Half wd be for tax yr 2014 and the other half plus the Fall of '15 would then be taxed the next yr, tax yr '15 (s/ that occur)?
No, you can’t divide in half. Box 5 should represent all scholarships and grants credited to the student’s account in 2014. It doesn’t matter when they are for, it matters when they were credited to the account in determining for which tax year they are reportable. When they are credited to the account is when the student received them. Verify the number with the bills and the student’s online account.
IRS Pub 970, page 6 tells you how to report any taxable amount on the forms.
http://www.irs.ustreas.gov/pub/irs-pdf/p970.pdf
thanks again for the input. another quick question: does anyone know if I can put this taxable grant money on my taxes as taxable income? son = dependent . thanks
No, only investment income can ever be put on a parent’s return and only if that’s all the income the dependent had.
and , of course, this is not investment income. It is not wage or earned income either.
It is earned income for the purposes of federal filing requirements and the federal standard deduction. It is unearned income for the purpose of the federal kiddie tax, form 8615.
If your state has an income tax you need to check whether the state considers it earned or unearned income and for what purposes.
Thanks for the really good info, AnnoyingDad.
We are very grateful that our daughter received awards that covered tuition/fees and also room and board her freshman year 2014-2015. We are filing taxes and filed FAFSA reporting that in 2014 she was our dependent, and she filed 1040 claiming income that covered room and board (extrapolated from 1098T).
We are hoping that she will qualify for the same awards as a sophomore and beyond. If so, we could no longer claim her as dependent since her awards cover her living expenses.
Do you know if her upcoming and future awards will be affected by her room/board income and her/our filing status?
Scholarships received are disregarded when determining whether or not a student is a dependent for tax purposes.
From IRS pub. 501, pg. 15:
A scholarship received by a child who is a student is not taken into account in determining whether the child provided more than half of his or her own support.
http://www.irs.gov/pub/irs-pdf/p501.pdf
@venicemom,
Use the qualifying child support worksheet on page 16 of Pub 501 to determine whether the student provided over half their support. As MiddKidd86 posted, do not include amounts from scholarships/grants when going through the worksheet.
Generally, scholarships/grants received for finaid aren’t held against students for future finaid. FAFSA has questions that will subtract out finaid in the EFC formula. Generally, colleges will do the same in determining future finaid. Filing status shouldn’t matter either, though if you are paying for medical insurance for the student, providing food and shelter during summers and breaks etc., you are likely to still be able to claim your student as a dependent per the worksheet. Being away at school is considered a temporary absence for education.
Thanks so much for some clarity.
I do not see the thread with post from MiddKidd86, can you please send me the link? As I read the worksheet on page 16, scholarships and grants WERE to be included in their support. Confused.
Meantime, we did our taxes with TurboTax, which indicated that daughter would have to file taxes for the 1098T income. So we did and only the tuition/fees were deducted, balance was entered on form 8615 and shows up in her AGI.
Concerned that if she gets that room and board support in future years, we won’t be able to claim her as dependent because her living expenses are underwritten by scholarships/grants (see what I mean about that worksheet). And also, that the school/FAFSA will view her AGI (which is all grants/scholarships generated) and give her less money.
Post #14 in this thread is MiddKidd’s post. Check his reference to page 15 of Pub 501. What specifically on the worksheet leads you to believe scholarships should be included?
Make sure you read all the fafsa and/or CSS questions carefully. There’s a question on fafsa in the student section asking how much taxable scholarships the student reported to the IRS in AGI. The amount you enter for that question is subtracted from her AGI in the fafsa efc formula.
Hopefully you also included the cost of required books and supplies, if she kept receipts, in TurboTax and that was subtracted from her scholarships too.
Thanks so very much. After reading your most helpful posts and talking to customer service at the FAFSA office, I corrected her FAFSA financial section: I had originally entered the TOTAL amount in box 5 of the 1098T form for question 44d, but have now revised to report ONLY taxable income (after deducting for tuition/fees/books).
Again, thank you for responding and clarifying. SO HELPFUL!