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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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.
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.
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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