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Scholarship Taxes

Forum|Forum|6 years ago
January 25, 2020
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My daughter received 43,000 in scholarships. In box 1, 13,000 was for qualified educational expenses. The other 30,000 was for living expenses, books, etc. Does she have to file a tax return? I am claiming her and using the 1098 T on my return. I am so confused, and I have asked two turbo tax people who are researching the same places I am.

Thanks

Best answer by linaj20201

It depends. If your daughter used the entire excess scholarship amount to pay for any non-qualifying education expenses like room and board, she would need to file a tax return to report it as a taxable income. It exceeds her filing threshold. To see filing requirements for a dependent, see the image below. To see what are qualifying education expenses, click here: Qualifying education expenses

However, if part of the excessive amount is used to pay for qualifying education expenses, she might need to file only if the remaining amount she used to pay for non-qualifying education expenses exceeds her filing threshold. You both will report Form 1098-T to claim the education tax credit and report the income on your own return respectively.

[Edited 2/17/2020 | 5:04PM] @crystal2026

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linaj20201Answer

It depends. If your daughter used the entire excess scholarship amount to pay for any non-qualifying education expenses like room and board, she would need to file a tax return to report it as a taxable income. It exceeds her filing threshold. To see filing requirements for a dependent, see the image below. To see what are qualifying education expenses, click here: Qualifying education expenses

However, if part of the excessive amount is used to pay for qualifying education expenses, she might need to file only if the remaining amount she used to pay for non-qualifying education expenses exceeds her filing threshold. You both will report Form 1098-T to claim the education tax credit and report the income on your own return respectively.

[Edited 2/17/2020 | 5:04PM] @crystal2026

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chadcmoody

I don't think LinaJ2020's answer is correct after researching this for quite some time. From what you said, I believe your daughter will indeed need to file her own tax return since the taxable portion of her scholarship is $30,000 (room and board) and therefore exceeds the IRS limit of $12,200. As I understand it, this type of "income" falls under the area of so-called "kiddie taxes," which have recent changes affecting them--to the point where TurboTax is still working on making the appropriate tax forms available even at this late date. See IRS form 8615 and its instructions for more information. One positive note is that even though the scholarship is defined in form 8615 as "unearned income," your daughter should still be able to apply the $12,200 standard deduction to it which will lessen the tax implications. Overall, it seems that the IRS treats the taxable portion of scholarships as a hybrid of earned and unearned income, which makes things very confusing.

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linaj20201

Please my edited answer above. You both will report Form 1098-T on your own return respectively to claim the education tax credit and report the income.