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Is any of my son's college scholarship for tuition and housing taxable (and is it taxable on his 1040 or my 1040 if I claim him as a dependent)?

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June 5, 2019
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Best answer by Hal_Al

If it is taxable, it goes on his return, not yours. Scholarships for room & board are taxable.

Taxable scholarship, including Pell grants, is the amount of the scholarship that exceeds qualified educational expenses (QEE-tuition, fees and undergraduate course materials). If your dependent had no other income and his grants do not exceed his QEE by more than $6300 (~$12,000 for 2018-20, $14,600 for 2024)), he does not need to file a tax return.

There is a tax “loophole” available. The student reports all his scholarship, up to the amount needed to claim the American opportunity credit, as income on his return. That way, the parents can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship. You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.

Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 2. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.

Hal_AlAnswer

Employee

If it is taxable, it goes on his return, not yours. Scholarships for room & board are taxable.

Taxable scholarship, including Pell grants, is the amount of the scholarship that exceeds qualified educational expenses (QEE-tuition, fees and undergraduate course materials). If your dependent had no other income and his grants do not exceed his QEE by more than $6300 (~$12,000 for 2018-20, $14,600 for 2024)), he does not need to file a tax return.

There is a tax “loophole” available. The student reports all his scholarship, up to the amount needed to claim the American opportunity credit, as income on his return. That way, the parents can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship. You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.

Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 2. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.

D

deltadawn1999

If my son (age 18) receives scholarships and grants and he has a Michigan Educational Trust account, when combined exceed the charges for tuition, qualified expenses and housing, who reports the 1098-T and 1099-Q info? If I am reading everything correctly, he reports the earnings from the MET as "Other Income"-1040 Line 21, and he reports the housing costs as "Earned Income"-1040 Line 7 (when combined exceed the $6,300 limit); and I report the 1098-T info (that gives me the American Opportunity credit) - Can this be confirmed? Thank you for your time and assistance.