Since excess Pell Grant money over qualified education expenses needs to be reported as wages, are these excess amounts also therefore considered earned income?

Forum|Forum|7 years ago
June 5, 2019
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Best answer by TaxGuyBill

Although it is reported on the same line on the tax form as wages, it is not wages, and is not "earned" income. It is "unearned income" for almost every purpose.

However, for purposes of the Standard Deduction, it is considered "earned" and the full $12,000 Standard Deduction can be applied against it.

For anything else (such as the Kiddie Tax, eligibility as compensation for IRAs, etc,), it is still "unearned" income.

Carl11_2

Employee

No, It's considered passive income but it's taxed at the same rate as earned income. Therefore it's included in the total income reported on line 7 of the 1040.

T

TaxGuyBillAnswer

Employee

Although it is reported on the same line on the tax form as wages, it is not wages, and is not "earned" income. It is "unearned income" for almost every purpose.

However, for purposes of the Standard Deduction, it is considered "earned" and the full $12,000 Standard Deduction can be applied against it.

For anything else (such as the Kiddie Tax, eligibility as compensation for IRAs, etc,), it is still "unearned" income.