Scholarship question

[megh9679]

Hello,

I received a question on my tax preparation questionnaire that stated, "Did anyone in your family receive a scholarship in the past year, and were the funds used for anything other than tuition?" Is there a difference between a grant v. scholarship v. an award? How do I know what is reportable and what isn't?

Thank you.

[Vanessa A]

No, there is not a difference between any of them, if they are not used for qualified education purposes, they become taxable income.  This means, if you received a grant/scholarship/award and used it for room or board or to buy a vehicle to get to school, that becomes taxable income.  

I am not sure where you are seeing this question, but you will need to enter your 1098-T on your return.  If you are the student, then anything in box 5 that is larger than box 1, will be considered taxable. If this is not the case, then if you are a dependent or can be claimed as a dependent, you do not need to enter the 1098-T. 

Are you claimed as a dependent on your parents return.  If so, they can also still enter the 1098-T on their return, even if you have a taxable scholarship to claim an education credit.  See the answer by Champ Hal Al for a detailed explanation on how to maximize your credit and minimize their scholarship income.

[Hal_Al]

Q.  Is there a difference between a grant v. scholarship v. an award?

A. No.

Q. How do I know what is reportable and what isn't?

A. Scholarships that pay for qualified educational expenses (QEE - tuition, fees, books and other course materials) is tax free.  Scholarship amounts that exceed QEE is taxable income, on the student’s tax return.

If box 5 of the 1098-T exceeds box 1, TurboTax (TT) will treat the difference as taxable income, unless you enter additional QEE at books and other expenses. Room & board are NOT QEE.

If you are entering the 1098-T, on the parent's return, TT will advise  you that your student has taxable scholarship income.  It will not (and should not) enter the taxable scholarship on the parent's tax return.

You say "I received a question on my tax preparation questionnaire that stated, 'Did anyone in your family receive a scholarship in the past year, and were the funds used for anything other than tuition?' "

I don't recall ever seeing that question in TT.