TurboTax

File with experts
File your taxes
Experts at your fingertips

An expert helps with your taxes, or does them for you
TurboTax Expert Full Service

TurboTax Expert Assist

TurboTax Self-Employed
Prior year taxes
File myself
File myself
Do it yourself

We'll guide you step-by-step
TurboTax Do It Yourself

TurboTax Self-Employed

TurboTax Desktop
TurboTax Free

Activate your product

Prior year taxes
Business
Business
Business taxes

Get your T2 corporate return done right, your way
TurboTax Business

TurboTax Business Desktop
Tax situations
Tax situations
Tax situations

Find extra guidance for your big life moves
For investors

For 25 and younger

For self-employed

For new to Canada

For life changes
Resources
Resources
Resources

Explore tax tools, get tips, and read reviews
Personal income tax calculator

RRSP savings calculator

Learning hub

TurboTax support (FAQ)

TurboTax community
Pricing

Community

Solved

Is an REU summer research stipend considered Unearned Income for dependent student?

Forum|Forum|3 years ago
March 26, 2023
2 replies
0 views

Working on daughter's taxes (dependent). Is an REU (research experience for undergraduates) summer program through the NSF (school distributed 1099-Misc box 3 for the amount) - considered Unearned Income? The University considers this a stipend. This was at a college during the summer for which she is not pursuing her degree. Doesn't really seem like it should be hit by the kiddie tax... thanks

TurboTax Free Edition Online

Best answer by Hal_Al

Q. Is an REU summer research stipend considered Unearned Income for dependent student?

A. Simple answer: No.

But TurboTax will treat it as unearned income if you enter it as "other income". Income reported on a 1099-Misc (box 3) will usually get reported as other (unearned) income on line 8z of Schedule 1.

In TT, you have to work around the1099-MISC. Instead of entering in the 1099-Misc section, you enter it as taxable scholarship. After entering your 1098-T, you will be asked if you had any scholarship not shown on the 1098-T. Answer yes. Then enter the amount. When asked how much was used for room & board, enter the amount again. That step makes it taxable.

Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $12,950 filing requirement and the dependent standard deduction calculation (earned income + $400). It is not earned income for the kiddie tax and other purposes (EIC. IRA contributions). So, technically it's still subject to the kiddie tax, but because of the increased standard deduction, most students don't actually pay any tax.

The IRS defines unearned income in the Instructions for IRS form 8615.

Unearned Income

Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually performed (earned income). It includes taxable interest, dividends, capital gains (including capital gain distributions), rents, royalties, pension and annuity income, taxable scholarship and fellowship grants not reported on Form W-2, unemployment compensation, alimony, the taxable part of social security and pension payments, and income (other than earned income) received as the beneficiary of a trust.

Research stipends are generally not reported on a W-2.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

Hal_AlAnswer

Employee

Q. Is an REU summer research stipend considered Unearned Income for dependent student?

A. Simple answer: No.

But TurboTax will treat it as unearned income if you enter it as "other income". Income reported on a 1099-Misc (box 3) will usually get reported as other (unearned) income on line 8z of Schedule 1.

In TT, you have to work around the1099-MISC. Instead of entering in the 1099-Misc section, you enter it as taxable scholarship. After entering your 1098-T, you will be asked if you had any scholarship not shown on the 1098-T. Answer yes. Then enter the amount. When asked how much was used for room & board, enter the amount again. That step makes it taxable.

Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $12,950 filing requirement and the dependent standard deduction calculation (earned income + $400). It is not earned income for the kiddie tax and other purposes (EIC. IRA contributions). So, technically it's still subject to the kiddie tax, but because of the increased standard deduction, most students don't actually pay any tax.

jaohAuthor

Ok. Since the REU is from a different school than the 1098-T, that should still be ok - we're just doing that to make it taxable. Assuming then the end result is the REU amount will show up on schedule 1 once complete (maybe line 8r) and no 8615 should be generated? That sound correct? Thanks Hal-Al!

Employee

Q. Since the REU is from a different school than the 1098-T, that should still be ok - we're just doing that to make it taxable?

A. Yes.

Q. Assuming then the end result is the REU amount will show up on schedule 1 once complete (maybe line 8r) and no 8615 should be generated? That sound correct?

A. Yes. It must show up on line 8r, to be classified as taxable scholarship and get him the larger standard deduction. No form 8615 will be generated as long as his total income is less than $14,100 (12950 +1150)