@brommabo wrote:
Our son applied for and got a scholarship from my husband's company that was reported on a 1099-MISC Box 7 in my son's name($3000). Do we put that as a scholarship on our tax return which affects education credit negatively since he has a full tuition and fees scholarship from his college? (We have claimed him as a dependent.)Or does he report it as self employment income income and file his own tax return? He had no other income in 2019.
That is income in your son's name and goes on your son's return. When entering the 1099-MISC, I believe there is a box under "special circumstances" to check for scholarship. This is not self-employment and he does not have to file a schedule C. (The payer should have used box 3.)
However, if he has a full scholarship for tuition and fees, you should not be getting any tax credits. There are some tricks you can do (sometimes) in which
a: you treat part of the scholarship as if it paid for room and board instead of tuition.
b: he pays income tax on this part of the scholarship.
c: you are treated as though you paid part of the tuition with your own money, which gives you a credit bigger than his tax bill.
This is tricky and requires coordination and advanced knowledge. I'm a bit concerned that you are claiming to have a credit on a full scholarship, and yet you don't know how to report the additional taxable scholarship from the third party. You might want to write back with more info. @Hal_Al I know you know this area better than I do.
