Q. Is an REU summer research stipend considered Unearned Income for dependent student?
A. Simple answer: No.
But TurboTax will treat it as unearned income if you enter it as "other income". Income reported on a 1099-Misc (box 3) will usually get reported as other (unearned) income on line 8z of Schedule 1.
In TT, you have to work around the1099-MISC. Instead of entering in the 1099-Misc section, you enter it as taxable scholarship. After entering your 1098-T, you will be asked if you had any scholarship not shown on the 1098-T. Answer yes. Then enter the amount. When asked how much was used for room & board, enter the amount again. That step makes it taxable.
Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $12,950 filing requirement and the dependent standard deduction calculation (earned income + $400). It is not earned income for the kiddie tax and other purposes (EIC. IRA contributions). So, technically it's still subject to the kiddie tax, but because of the increased standard deduction, most students don't actually pay any tax.
