My daughter's tuition is less than her scholarship, so her scholarship balance is considered income and she is being taxed on it. Is this correct?
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jerrydelosreyes
Level 1

My daughter's tuition is less than her scholarship, so her scholarship balance is considered income and she is being taxed on it. Is this correct?

She did not receive the scholarship money herself, it was paid directly to the school.  She still had to pay $$ to the school even, but because they bill in November, and scholarship $ is paid in January it makes it appear she received the balance when she owed over $15,000.  This only happened senior year.

1 Reply
JohnW15
Intuit Alumni

My daughter's tuition is less than her scholarship, so her scholarship balance is considered income and she is being taxed on it. Is this correct?

Yes, you’re correct, the excess is taxable.  It’s a common scenario, unfortunately, where billing is in one year and scholarship payment in another. 

According to IRS Publication 970, Tax Benefits for Education,

“A scholarship or fellowship grant is tax free only to the extent:

·         It doesn't exceed your qualified education expenses;

·         It isn't designated or earmarked for other purposes (such as room and board), and doesn't require (by its terms) that it can't be used for qualified education expenses; and

·         It doesn't represent payment for teaching, research, or other services required as a condition for receiving the scholarship.”


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