Scholarship

[lilo1216]

Hi!

I receive a scholarship from my work to pay for my college tuition.  My college is an accredited four-year university, and I attend full time. The check they send is made out to my university, however, they sent it too late to apply it to tuition so I just received a reimbursement check.  I did, however, apply some of it to books and things, but  I would have used it for tuition if it had been sent in time.  Do I need to pay taxes on it since it didn't arrive before tuition was due?

[LinaJ2020]

If you did not use it to pay for the tuition, it would be taxable to you.  You may claim a tax break on the portion you used to purchase books and supplies. 

To enter the books and supplies information in the program, here are the steps:

In TurboTax online,

• Sign in to your account, select Pick up where you left off
• At the right upper corner, in the search box, type in "1098t" and Enter
• Select Jump to 1098t
• On the screen, Now Let's gather XYZ's Additional Education Expenses
• Follow prompts
• Next screen, Your Education Expenses Summary, select Edit
• Next screen Here's Your Education Summary, under Tuition, select Edit to enter tuition information

[Carl]

Basically, the amount paid directly to the school is considered a scholarship. After entering the 1098-T exactly as printed, follow up screens will ask you for scholarships not included in box 5 of the 1098-T. enter the amount your work paid directly to the school. Then you'll be asked for qualified education expenses not included in box 1 of the 1098-T. enter the amount you paid for books and lab fees there.

The difference is taxable income to you and will be included in the total income on line 7 of your 1040, with the annotation "SCH" next to it. The "SCH" indicates that some of the income included in box 7, is taxable scholarship income.

[taxmen2021]

Hi ,

My daughter has received a scholarship from her work and payment has been made to her ( not to university). I will claim her as dependent on 2022 tax return. I have contacted the Scholarship office at her work and they replied in Massachusetts scholarships are not taxable and it will not be included on her W-2 form. Her total amount of scholarships from the University and the work will be less then I paid for her tuition.

Should we record the scholarship from her work on the tax return? On whose tax return should we record the amount not reported to us from work on any tax forms?

Thank you.

[Hal_Al]

Q. Should we record the scholarship from her work on the tax return?

A. No.  Scholarships that pays for qualified expenses (tuition, fees, books and other course materials) are tax free and are not taxable and are not reprted on the tax return (if it was taxable it would go on her return, not yours).

You (or she) cannot claim a tuition credt based on expenses that were covered by employer assistance/scholarship. 

You say "My daughter has received a scholarship from her work".  If she's working, what's she spending her income on? That is, are you sure she qualifies as your dependent?

A child of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:

1. He is under age 19, or under 24 if a full time student for at least 5 months of the year, or is totally & permanently disabled
2. He did not provide more than 1/2 his own support. Scholarships are excluded from the support calculation
3. He lived with the parent (including temporary absences such as away at school) for more than half the year

So, it doesn't matter how much he/she earned. What matters is how much he spent on support. Money he put into savings does not count as support he spent on him self.

The support value of the home, provided by the parent, is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants.

The IRS has a worksheet that can be used to help with the support calculation. See: http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

Are you sure her employer's help is classified as "scholarship"and not emplyer assistance (tuition reimbursement).  There is a subtle difference, tax wise. The employer benefit is still tax free (if used for tuiton) but only up to $5250.  Any excess (over $5250) is included as taxable income on the employee's W-2. Employer assistance is not ignored in the support calculation (it's treated as her funds, since it is her earned benefit). 

[taxmen2021]

Thank you for the explanation

[taxmen2021]

Hi Hal_Al,

If the scholarship received from the work is a little amount and combined with college's scholarship still below the total tuition cost, may she claim AOTC? If yes, how the scholarship from her work to be reported on tax return?

Thank you.

[Hal_Al]

Q. If the scholarship received from the work is a little amount and combined with college's scholarship still below the total tuition cost, may I claim AOTC, since she is my dependent?

A. Yes. In simple terms, the difference between total expenses (tuition, fees and course materials) and the amount of scholarship is the amount you can use to claim the AOTC.

Q. If yes, how the scholarship from her work to be reported on tax return?

A.  After entering the 1098-T, in TurboTax, you will be asked if there was any additional schoarship, not shown on the 1098-T.  Answer yes and enter the amount. That assumes the work schoarship was not included on her W-2 or her 1098-T.

[taxmen2021]

Thank you very much for great explanations.