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chrissyluckie
Level 2

When Do Taxes Become Mandatory for Grant or Scholarship "Income"

Is my impression correct that you MUST pay taxes on grants or scholarships in excess of expenses for an academic session as reflected by Form 1098T? If Box 1 lists $2,000 in "Payments Made," and Box 5 has $5000 for grants or scholarships, does the $2,500 surplus attract mandatory tax liability? Thanks!

2 Replies
Hal_Al
Level 15

When Do Taxes Become Mandatory for Grant or Scholarship "Income"

The simple answer is: when box 5 exceeds box 1 by more than $12,200.

Everybody gets a (potential) $12,200 standard deduction, even student-dependents*. So, if you have less than $12,200 total taxable income, you will owe no tax and do not even have to file a tax return

 

*There is an exception for dependents with investment income (interest, dividends, capital gains and taxable 529 plan distributions)

DianeC958
Expert Alumni

When Do Taxes Become Mandatory for Grant or Scholarship "Income"

Yes, if Box 1 is less than the amount in Box 5 then the excess amount is considered taxable income.

 

There are other school expenses that you may deduct that do not appear on form 1098T they are

 

  • Fees the school charges
  • Cost of books and supplies for classes taken

By adding these other expenses to your return you reduce the amount of scholarship that is taxable.

 

Link about Taxes on Scholarships

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