I do have a meal plan, I’m paying for it using the scholarships, but I don’t think it’s subject to tax because the money goes straight to the university and never goes to me. Is that correct?
You pay taxes on any amount of scholarship over the QEEs -even if that scholarship goes directly to the university. (My daughter’s scholarship is awarded by her university. They issue a bill and then pay it themselves. Still taxed.)
Scholarship money used to pay for anything that is not QEE is taxable. A meal plan is not QEE.
No, not correct. A scholarship that is used to pay for non-qualified expenses (and a meal plan is non-qualified in terms of scholarships) is taxable, even if the scholarship is being used to pay for a part of the “cost of attendance” and paid directly to the school. It’s being used for your benefit.
Ok, after doing some more research I think I’m starting to understand. Thank you everyone for all your help. I have a meeting with my financial planner next week. But in the meantime, how to I calculate what percentage of my scholarship will be taxed? Two things that I’ve found are that it’s my parents’ income tax rate (because I’m a dependent), and that it’s the tax rate for trusts and estates. Are either or those correct?
No and not necessarily. You’re referring to the kiddie tax, which may or may not apply to you, depending on a number of different things. Until this year, the parents’ highest marginal rate was used to determine the tax for income subject to the kiddie tax, but now the rates for trusts and estates are used.
What will your total income be for 2018? Break it down by type of income and amounts, and we might be able to ballpark your 2018 tax situation.
One more thing. Because I’m paying my tuition and most fees with Florida Prepaid, I can’t claim AOTC with that can I? But books will count towards AOTC?
This year I will have about $7,000 in scholarships where $2,000 is spent on food and the rest is a refund from UCF.
Other income will be $990 roughly from a job.
Thank you so much for help
It sounds like in 2018 you will have $990 in earned income from a job and $7,000 in taxable scholarships, which is also considered earned income when figuring the standard deduction for dependents. If this is the only income that you have for 2018 (no investment income, interest, capital gains, dividends, etc.), you will have no taxable income, because all your income will be offset by the standard deduction.
In your first post you said that you were getting two scholarships worth $30,000 each. Is this $60,000 over four years?
When you say ‘this year’ do you mean 2018, so the fall semester and the 2018 tax year (with your $900 earnings?). If you are receiving fall BF of about $3500 fall and UCF scholarship of about $3500, that makes sense. Very roughly, your earned and unearned income in 2018 would be that $7000 + $1000 from a job. That’s all under $12000 standard deduction so you might not owe any taxes. Next year, 2019, you’ll have double the scholarship money because spring and fall semester, or $14000, plus summer earnings and you’ll owe a little in the taxes.
You are right that you (parents) can’t get the AOTC for things paid with FPP. That’s already tax benefitted money. Plus, you’ll receive $300 for books from BF, so you’ll have to claim that as taxable if you want to use the money for AOTC credit. If you pay more than that in books, and you pay for them OOP, your parents could claim that as AOTC. Basically, if you want the AOTC you have to declare some of that book money as taxable. You are really talking a very little credit for your parents.
Yes, it’s $60,000 over four years. Thank you everybody for your help, I’m meeting with a financial planner soon and I’ll ask her all of these questions.
One last thing though before school starts, since I don’t get my BF money for about three weeks, how should I pay for my books? UCF has a way to put the books on my tab to use my scholarship money to pay for it, I could use my credit card and wait for my refund, or I can use my parents’ credit card and wait for the refund and then pay my parents back
You can do it any way you want. If you put it on your account at UCF, you are going to be limited to that bookstore. You might find cheaper books online or to rent. Some bookstores have used books and rental books too. Do it whichever way is convenient for you.
What is this ‘financial planner’? How are you charged for services? How is the financial planner qualified to give tax advice?