IRS Publication 501 clearly states "Earned income (only for purposes of filing requirements and the standard deduction) also includes any part of a taxable scholarship."
Why then does TurboTax list my daughter's taxable scholarship amount (for room & board) on Line 1 of form 8615, which is marked for unearned income?
Earned income includes salaries, wages, professional fees, and other amounts received as pay for work you actually perform. Earned income (only for purposes of filing requirements and the standard deduction) also includes any part of a taxable scholarship.
This means it is not earned income for the purpose of Form 8615. She did not earn this income.
Unearned Income
For Form 8615, "unearned income" includes all taxable income other than earned income. Unearned income includes taxable interest, ordinary dividends, capital gains (including capital gain distributions), rents, royalties, etc. It also includes taxable social security benefits, pension and annuity income, taxable scholarship and fellowship grants not reported on Form W-2, unemployment compensation, alimony, and income (other than earned income) received as the beneficiary of a trust.
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