@Eileen 1 Just keep this in mind, and it helps one to keep things straight when it comes to taxes.
Colleges work in academic years. The IRS does not. So the reality is, it takes you 5 calendar years to get that four year degree. With that said and with very few exceptions that I'm aware of:
- Scholarships, grants, 529 distributions are reported as taxable income (initially) in the tax year they are received. It does not matter what tax year that money is "for". (Taxability is offset by the qualified expense the money is used to pay for.)
- Qualified education expenses are claimed/deducted in the tax year they are paid. It does not matter what year is paid "for".
