I know room and board isn't usually exempt but as a Resident Assistant, he is required to live on campus so wouldn't this make it exempt according to IRS Pub. 525?
How do you report this? My daughter is also an RA and was given a w-2 by her college. They deducted Federal and State taxes from her room and board, so she is actually paying to work at the college.
This is an old thread. Please start a new question of your own.
Yes, Campus resident advisers (RAs) generally do not have to pay income tax on these benefits. Housing is excluded when residing in the dorm is a condition of being an R.A., and meals are excluded when furnished by the college for the convenience of the college.
I have seen conflicting answers for this same question. Some say it is taxable income on the students return and others feel it is not taxable. If it is not taxable, should I amend the amount on the 1098t for scholarships? (It includes the cost of room and board and my daughter is an RA)
I’m curious how you handled this situation. My daughter also received a 1098T and the value of the free room and board, which is provided in exchange for RA duties, was included in box 5 with her other scholarships. It makes it look as if her qualified tuition expenses were less than her scholarships. In 2016 I deducted the room and board from this scholarship amount. Just today I received a tax bill from NY stating that I entered an incorrect amount for box 5, and she wasn’t eligible now for the tax credit for her tuition expenses. I haven’t found a definitive answer anywhere on how to handle the value of the room and board in regards to resident assistants. I believe it is a condition of employment and should not be reported as a scholarship. But now I’m being audited over this! Ugh!
Either way (1098-T or W-2) is correct. W-2 is better. It is taxable, either way.
if on a W-2, TT will put it on line 1 of form 1040, as wages. If on a 1098-T, the amount should be included in box 5 with any other scholarships. It will still go on line 1 of form 1040 but with the notation "SCH". It is still treated as "earned income" for purposes of calculating the student's standard deduction.
If it's in box 5 of the 1098-T and the parent wants to claim an education credit, you will have to use a work around in TurboTax (TT). Here's how I would do it. Enter the 1098-T, on your (the parent) return, but only enter the amount of tuition you want to claim (usually $4000) in box 1. Nothing in box 5. You only enter the 1098-T to get TurboTax to check the proper box on form 8863. Lying to TurboTax to get it to do what you want does not constitute lying to the IRS.
Enter the 1098-T, exactly as received, on the student's return. In his interview, you should eventually reach a screen called "Amount used to calculate education deduction or credit" Be sure the amount in that box is $4000. That will put all his excess scholarship as income on his return.
Be advised some people are saying they're not getting the "Amount used to claim the tuition deduction or credit" screen on the dependent’s . The alternate workaround is to enter $4000 less than the actual box 1 amount, when you enter the 1098-T on the student's return or $4000 more in the box 5 amount.
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A general note on the tuition credit and scholarships:
Even when a student may be on full scholarship, there is a tax “loophole” available. The student reports all his scholarship, up to the amount needed to claim the American opportunity credit, as income on his return. That way, the parents (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship. You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.
Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 2. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.
You can both use the 1098-T to enter the expenses. If you claim the tuition credit, you do need to report that you got one (the TurboTax interview will handle this) Your son should use the 1098-T because it makes entering scholarship income go smoother.
From the 2018 form 1040 instructions (pg 100): “You may be able to increase an education credit if the student chooses to include all or part of a Pell grant or certain other scholarships or fellowships in income. For more information, see Pub. 970, the instructions for Form 1040, line 17c, and IRS.gov/EdCredit
It would have been "More" correct for the college to have issued a W-2 for the value of the R&B, because it is "in fact" earned income. If it's included in box 5 of the 1098-T, then you can treat it like any other scholarship and you'll be fine. Just understand that if the total of all scholarships/grants received exceed the total of qualified education expenses (tuition, books, and lab fees) then the student will report the 1098-T and other education stuff on the student's tax return, and the student will pay taxes on the excess - not the parent.
The room and board is not a qualified education expense. But by including the value of the R&B in box 5, the collage is allowing you to apply the cost of that R&B to those *qualified* education expenses, with any excess being taxable income to the student.
Exact same for me right down to the year. I got a running bill/credit printout from Clarkson and have spent hours breaking it down by school year and then by tax year, because they aren't the same thing. Internship and RA position has made this so much more complicated than it needs to be. I'll forward my notes to the auditor tomorrow and hope that when he looks at the big picture he'll dismiss it.
I have read all I can on this topic and I am still confused by the varying responses.
IRS Publication 525 says: "You don't include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met:
1. The meals are: a) Furnished on the business premises of your employer, and b) Furnished for the convenience of your employer.
2. The lodging is a) Furnished on the business premises of your employer, b) Furnished for the convenience of your employer, and c) A condition of your employment. (You must accept it in order to be able to properly perform your duties.)"
Given this, if an RA is required to live on campus and the benefits are provided as noted above, why would this benefit be taxable?
The person is more student than "employee". Publication 970 governs, not 525.
The fact that it's reported on form 1098-T indicates that the school considers it scholarship, not non taxable fringe benefit.
Thank you for the response!
After reviewing everything I can get my hands on, I am still falling on the other side of this question - believing that the room and board benefit is NOT taxable because of the qualifications met under IRS Pub 525.
I understand the point you are making between the two sets of rules; but it seems the only distinction in your analysis is who the employer is. In other words, if my son was still a student, but he was an employee of a non-university business, and received room and board benefits, and he met all the conditions in IRS Pub 525, the benefit would not be taxable. The only difference between the two circumstances is that the University is the employer in one example and a non-university entity is the employer in the other.
Whether the employer is the University or someone else does not appear to be a test for whether the benefit is taxable. Nor does there appear to be a "more" student vs. "more" employee test. He is employed as an RA and he meets the qualifications under IRS Pub 525 - which explain how room and board are taxable as an employment benefit. Under this circumstance, it appears that it should not be taxable.
I do agree that if the room and board benefits were NOT a condition of employment or if they did not meet the IRS Pub 525 requirements, it would be taxable.
Of course, I could be completely wrong about this and will have to talk to the IRS about it. 🙂
Regardless, thank you again for the response.
I am curious....What was the outcome with your auditor discussion? Did they agree that room and board for an RA is not taxable? Thanks.
The auditor told me you send in the intemized statement and a statement of my own. A couple months later I received a bill with interest from the state with a letter that says 1) I didn't make my case and 2) I didn't send an itemized statement from the bursor. Which I did. So we paid them and on the invoice I write in sharpie: YOU ARE THIEVES. AS SOON AS I RETIRE WE'RE LEAVING THE STATE AND TAKING TWO NYS PENSIONS WITH US.
@Fafsasucks the same exact thing happened to me. I sent in the college statement which clearly showed the amount was applied to the bill as a room and board credit. It was not used for tuition, it was not a scholarship, yet the college reported it as such. NYS tax department said it did not make us eligible for the tuition credit, even though we still paid tuition costs. And just today I received a bill for the 2nd year my daughter was an RA. I’m so mad! I wonder if TurboTax audit services will back me up on this? I forgot I paid extra for that.
Long and short of this situation ...
If the amount in box 5 of the 1098-T is more than the box 1 tuition + out of pocket costs for fees & Books required to be paid to the school then that portion is taxable and is added to line 1 of the return with the letters SCH and the amount in the margin. If the RA fees were reported in this way then the student must claim them as wages and they may be taxable depending on the student's other income. (by doing it this way the student and the school avoid FICA taxes and usually the student doesn't even pay federal/state taxes if they are below the $12K filing requirement).
The scholarship box 5 amount MUST pay off the box 1 amount first UNLESS you choose to report some or all of the tuition as taxable so that the parent can claim an education credit. (usually up to $4000 of the tuition expenses are claimed as income on the students return so the max AOC can be taken on the parents return ... this is a little known / hardly used trick that is actually in the IRS pub).
@donna136 If your student did not report the Room & Board scholarship as income, on both his federal and state return, then I'm of the opinion that the state is correct in treating it as scholarship applied to tuition and denying you the tuition credit.
Either way, you should contact audit services to handle the appeal. That's what you paid for. Call Tax Resources, Inc. at 877-829-9695, or report your notice on their web site at http://intuit.taxaudit.com/.