I have some questions about my son's scholarships for college. He will be a freshman this fall. So far, he has received approx $25K in private scholarships and most have no restrictions on use...that is, they can be used for tuition, fees, room and board, books, supplies and equipment. Only 2 do not allow room and board expenses. Also, the University does not charge his student account for books and must be paid for out of pocket. Also, his tuition and fees is covered by my post 9/11 GI bill benefits that I have transferred to him, so the scholarship money he has received will not be used for tuition and fees, but only used for room and board, books, supplies, and equipment. His room and board expenses will be approx $12K. His books, supplies, and equipment we're guessing to be approx $5K. His room and board will be payable out of his student account. We were able to charge approx $2.5K of equipment expenses to his student account, however his books and supplies will not be able to be charged to his account. On that note, we're guessing he will probably receive a refund of his scholarship money of approx $10K. He will not have access to that approx $10K of money until well after the semester starts, therefore we will have to pay for his books and supplies out of pocket up front. Here are my questions:
Will the refund of approx $10K automatically be taxable because it's a "refund"? Let's say out of that approx $10K refund, we use $3K for books and supplies, he uses $2K for travel expenses and saves the extra $5K for next year. I'm pretty sure the $2K in travel expenses would be considered taxable, however what about the $3K that was refunded and then used to reimburse the out of pocket expenses paid for books and supplies as well as the extra $5K that was refunded and not spent for any expenses and saved for next year....would that $3K and $5K be taxable? Also, lastly, with any of this money being taxable, would it be considered income for my son and would he need to file the tax forms and pay the taxes, or would it be considered income for myself and I would have to pay the taxes or is it optional who files...that is can we decide to consider it income for either ourselves or our son depending on which is more beneficial?
