If the
full scholarship in box 5 exceeds tuition (box 1 or 2), the excess is considered taxable income, regardless whether you received the funds or how they were distributed. There is no credit and taxable
difference is reported as income on student's tax return.
The
good news is: if excess scholarship is his only income and it is less than
$6300 for the year, your son is not required to file at all.
If
student's earned income (such as W-2), when added to scholarship exceeds $6300,
then he is required to file his own tax return. When he files - be sure that he indicates on his tax return
he is being claimed by someone else.
