My daughter received a VA Scholarship. We are finding conflicting information if the scholarship portion used for room, board, etc, is counted as taxable income. We have been told according to IRS Publication 970 that "Payments received under any law administered by the Department of Veterans Affairs (VA) are tax free." Her scholarship is administered by the State Department of Veterans Affairs. I can't find a way to answer this in the software or if I should be checking the box for for a scholarship for her or if the box is referencing ROTC, GI Bill, etc for a veteran themselves receiving direct benefits in the form of a scholarship.
It doesn't seem to make sense to me that an award of 100% VA scholarship would go to a student then they would be expected to pay taxes on the funds used for the non-tuition/books/fees portion of their education expenses?
She also had additional earned income from an on-campus job of $4000 as she is saving money to attend graduate school.
