College Student Dependant - Kiddy Tax

Forum|Forum|3 years ago
March 17, 2023
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I have twins in college. One gets aTuition plus scholarship. The other tuition only. Somehow when I am trying to calculate their taxes on turbo tax the one with more scholarship is owing $1000 less on the kiddie tax than the one whose scholarship only covered tuition. The 2nd with the higher taxes did earn $3000 in on campus work + additional $3750 scholarship and $5000 1099NEC for a summer internship. They both received about $2000 in 1099 int payments on their money. The one with more scholarship got the full deduction for a single payer of $12950 but the other only got $7000. I don't understand why it is so vastly different. The one with a full scholarship + has $3934 on taxable income but the one with less scholarship shows a taxable of $6830. I am about to lose my mind. Why should you have to pay so much in taxes for scholarships above tuition, its almost like they would be better off with loans, at least they could write of the interest. Our income is low because I work part time and my husband is retired. Their taxes are essenitally paying the government back for our earned income credit.

Hal_Al

Employee

A dependent's standard deduction is the higher of $1150 or their earned income + $400 (but not more than $12,950). For purposes of calculating the standard deduction, taxable scholarship is considered earned income. But taxable scholarship is not treated as earned income for calculating the kiddie tax.

For purposes of calculating how much of the scholarship is taxable, books & computers, in addition to tuition and fees, are considered qualified expenses.

For more help with the calculations, provide more detail on the amount and the source of their income. The 1099-NEC income is (most likely) also subject to self employment (social security and Medicare) tax of about 14% net.