Unearned Income from scholarship reported on 1098-MISC

[BW520]

My daughter received a scholarship that was not reported on the 1098-T that the university mailed to us.  The scholarship check was mailed directly to us and had no limitations on what it could be used for.   We received a 1098-MISC for this scholarship. 

My daughter has additional scholarships that were reported on the 1098-T form.  These scholarships exceeded the tuition expenses.  My understanding is that the overage is considered earned income until the standard deduction is met,

The difference between tuition expenses and the total amount of scholarships is well below the standard deduction.  ...but after reviewing the printed forms Turbo tax is treating the 1098-MISC reported scholarship as unearned income when determining the standard deduction.  (Standard Deduction Worksheet for Deductions, Line 1)

Should the scholarship reported on the 1098-MISC be treated as earned-income or unearned income with respect to the standard deduction calculation?

[KrisD15]

It's earned income if entered as a scholarship, unearned if entered as "Other Income".

If the income is under the Standard Deduction, she needn't file. 

Here are some steps if you absolutely need to enter Form 1099-MISC, but if she won't need to file, it won't be needed.

Enter the 1099-MISC Under

Wages & Income

Other Common Income

Income from Form 1099-MISC   START

Enter the 1099-MISC as it was reported, Type "Scholarship" in for the description, 

Select "None of these apply" for uncommon situations, 

"NO" not like main job, 

Only got it in 2024, 

"NO" no intent to earn money, 

DONE

 These are TurboTax questions, not IRS questions. These need to be the answers to let TurboTax know it is not Self-Employment.

THIS GETS THE FORM 1099-MISC ON YOUR RETURN, now back out the double income-

Wages & Income

LESS COMMON INCOME

Miscellaneous Income, 1099-A, 1099-C    START 

Scroll all the way down to the LAST option- Other reportable income   START 

Type "Scholarship reported on Form 1099-MISC" and enter the amount AS A NEGATIVE AMOUNT (put a minus sign (-)  in front of the number

Done

The 1099-MISC as well as the negating entry will both be on Schedule 1 line 8z

Go to the education section and continue to the screen that asks for scholarships not reported, 

enter the amount on the 1099-MISC here. 

That lands on Schedule 1 line 8r and is treated as Earned Income for the Standard Deduction and IRA contributions. 

[Hal_Al]

Enter the 1099-MISC scholarship at Educational Expenses and Scholarships, under Deductions and credits (not at the 1099-MISC in  the income section).

After entering the 1098-T, one of the follow-up questions will be do you have any scholarships not shown on the 1098-T. Enter the additional scholarship there.  

Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $14,600 filing requirement (2024) and the dependent standard deduction calculation (earned income + $450).  It is not earned income for the kiddie tax and other purposes (e.g. EIC).  For grad students and post grad fellows, scholarship, stipend and fellowship income is earned income ("compensation") for IRA contributions.

Taxable scholarship goes on line 8r of Schedule 1, from which TurboTax treats it as hybrid income.