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Level 2
posted Jun 5, 2019 10:47:18 PM

1098 -T scholarships exceed tuition/fees. Student made over $6000 during year working. Who pays taxes on this extra scholarship amount?

please help us figure this out.  We'd like to have our son claim the extra $2000 in scholarships that exceeded tuition/fees because obviously his tax rate is lower. Can we do this? (I've heard that kids pay this at their parents tax rate; hoping to avoid that!)

Student: income 7000$ Age 20; dependent. he's filing taxes and will receive a small amount back.

scholarship amount exceeding tuition/fees: $2000.

Books for two semesters: $700 that arent on 1098t

please clear up how this all works! who pays the taxes on this amount? where do we put it on his tax form? or on our tax form? very appreciated!

0 13 4803
1 Best answer
Expert Alumni
Jun 5, 2019 10:47:20 PM

The income is always listed on the child's tax return. However, it is also correct that the tax may be calculated at your rate on the child's return (via Form 8615, aka "Kiddie Tax")

In order for this dreaded Kiddie Tax to be an issue, the unearned income (which would include taxable scholarships) has to exceed $2100.

https://www.irs.gov/taxtopics/tc553.html

You simply enter the taxable amount in the education section as a scholarship (on his return). You don't need to enter the 1098-T and go through all the steps. You can if you want, but the only output that matters is that the taxable amount ends up on line 7 of the 1040. All the input with his 1098-T, books, etc.. is unnecessary work just to get a single figure on to his tax return.

13 Replies
Expert Alumni
Jun 5, 2019 10:47:20 PM

The income is always listed on the child's tax return. However, it is also correct that the tax may be calculated at your rate on the child's return (via Form 8615, aka "Kiddie Tax")

In order for this dreaded Kiddie Tax to be an issue, the unearned income (which would include taxable scholarships) has to exceed $2100.

https://www.irs.gov/taxtopics/tc553.html

You simply enter the taxable amount in the education section as a scholarship (on his return). You don't need to enter the 1098-T and go through all the steps. You can if you want, but the only output that matters is that the taxable amount ends up on line 7 of the 1040. All the input with his 1098-T, books, etc.. is unnecessary work just to get a single figure on to his tax return.

Level 2
Jun 5, 2019 10:47:21 PM

thanks. we will add it to his 1040ez form, looks like we can just add it on another line in turbo tax; amount is actually 1935$.

OK, next question - on parents taxes we can still claim the $700 in books that we paid for AOTC, right? we qualify with our income to claim it. Will we also need to report the scholarship overage and the book costs will come off that?  or just claim the book costs?  thanks christina, you are really helping people!

Expert Alumni
Jun 5, 2019 10:47:25 PM

You're welcome. That's a little iffy and can depend on the terms of the scholarship. Its not necessarily cut and dry or a response that I can make quickly. In general, the scholarship applies to education expenses before it can be moved as taxable income. I hate to say it, but that's a brand new question that deserves its own post. In fact, I haven't seen that posted recently and I think it would be very helpful to the Answer Exchange community. Something like "Can I claim books on my return and shift some of the scholarship income to my child's return".

Level 2
Jun 5, 2019 10:47:27 PM

thanks - the scholarship went to a short trip abroad and certainly didnt cover any books for regular classes during the year. so we'd still like to take that credit; have receipts for books.  I'll post another question.

Expert Alumni
Jun 5, 2019 10:47:28 PM

Thank you! I really do think that'll be a good question...

New Member
Jun 5, 2019 10:47:30 PM

SO confused. here is a another thread which says parents declare scholarship winnings on their tax forms.

<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/2732554">https://ttlc.intuit.com/questions/2732554</a>

thoughts on this? does dependent kid claim these scholarships or do parents ?? any ideas are helpful

Expert Alumni
Jun 5, 2019 10:47:31 PM

Always kids. Never parents. A scholarship cannot be income of a parent. The thread is a little long, but the gist of the discussion was about claiming the child as a dependent. The user answering the question was not really addressing the issue of the scholarship income so much as who claims the child as a dependent to begin with (or whether the child claims him/herself)

Expert Alumni
Jun 5, 2019 10:47:34 PM

There are no circumstances when a parent claims scholarship income.

New Member
Jun 5, 2019 10:47:35 PM

ok, thanks again! big learning curve here.

Expert Alumni
Jun 5, 2019 10:47:37 PM

No problem.. I did think the other thread was confusing the original question.

Level 11
Jun 5, 2019 10:47:38 PM

@TurboTaxChristinaS  just to confirm why is excess scholarship not considered unearned income that can be filed on parents returns?  Thanks. You pointed out that it was unearned income so wouldn't it then have to be reported if over $2,100 on a return?   Also what if the excess is not scholarships but excess 529 distributions is it unearned income then and does it follow same rules?

Level 2
Sep 25, 2019 7:05:02 PM

If you aren't providing support, why claim as dependent?   If scholarships, earned and unearned income provide 100% support except for maybe health insurance....

New Member
Feb 3, 2020 4:20:26 AM

much obliged - the grant went to a short outing abroad and unquestionably didnt spread any books for customary classes during the year. so we'd in any case prefer to assume that praise; have receipts for books. I'll post inquiry.