Do I have to include the cost of tuition when calculating my support if I received a scholarship to cover the cost of tuition?
No. As written by the IRS, the specific language is below if this was a scholarship. The rules for a scholarship are clear.
Scholarships.
A scholarship received by a child who is a student isn't taken into account in determining whether the child provided more than half of his or her own support.
I have self employment income, and as such I could deduct less business expenses to keep my earned income greater than 50% of my support (if I count one semester of in-state tuition as part of my support). Can I do this? Do I have to deduct business expenses if it's favorable to me to not deduct them?
Yes. you must account for and use your business expenses. As far as the self employment income, it is important to enter all income received and any expenses related to earning and obtaining that income. It's not allowed to adjust your income for a tax benefit.
To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.
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