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kaykor13
New Member

If scholarship is deemed taxable (room and board) is it always unearned income ?

Trying to confirm if taxable scholarship income but is unearned income ? Or does the student claim it as income but the same as their summer job income (etc) on their return

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Hal_Al
Level 15

If scholarship is deemed taxable (room and board) is it always unearned income ?

Actually the answer is yes & no.

Scholarships are not earned income for purpose of refundable credits like EIC. It is not earned income for eligibility for an IRA contribution*.

It is earned income for purposes of calculating a student-dependent's Standard deduction. 

*Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2.

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4 Replies
Hal_Al
Level 15

If scholarship is deemed taxable (room and board) is it always unearned income ?

Actually the answer is yes & no.

Scholarships are not earned income for purpose of refundable credits like EIC. It is not earned income for eligibility for an IRA contribution*.

It is earned income for purposes of calculating a student-dependent's Standard deduction. 

*Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2.

kaykor13
New Member

If scholarship is deemed taxable (room and board) is it always unearned income ?

....is scholarship unearned income,  as it pertaine to the rate at which it is taxed -
  ? So- Student, a dependent on parents taxes, files his own return to report  his own summer income + the taxable part of his scholarship ....    is it just income like his summer job?  
....
Hal_Al
Level 15

If scholarship is deemed taxable (room and board) is it always unearned income ?

Good question. Earned income does not have a special tax rate, although it sometimes appears that way. Scholarships and earned income are both "ordinary income" and taxed at the regular bracket rates.
So, yes it is just income like his summer job*, for the purpose of  income tax rate.

It's important how you enter the scholarship, in TurboTax, to get it to count for the standard deduction**. You must enter it at the education expenses section***, not the income section.

*Unlike the summer wage job, the scholarship is not subject to FICA (social security and medicare) tax.
**A dependents standard deduction is limited to the higher of $1050 or his earned income +$350 (but no more than $6350).  Scholarships are "earned income" for this purpose.
***If you are not claiming educational expenses, there is an alternate way to enter scholarship, in TT. In TurboTax (TT), enter at:
- Federal Taxes tab (Personal in  Home & Business)
 - Wages & Income
- “I’ll choose what I work on” Button
Scroll down to:
-Less Common Income
      -Click "Visit All". You'll eventually reach a screen to enter the scholarship amount. (this option is not available in TT Online)
zo
New Member

If scholarship is deemed taxable (room and board) is it always unearned income ?

But, scholarships are unearned income.  They are considered earned income only for figuring the standard deduction.  Therefore any excess would be taxed at the higher kiddie tax rates wouldn't it?

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