Hello - me again. The previous questions I asked related to 2022 taxes. Our son's income was low enough to absorb the full scholarship of $8,500 and be fully offset by the standard deduction, resulting in no additional Federal taxes and only a small amount of NY state taxes. Again, thank you for your advice!
For 2023, however, his income went up to $8,200 - if I add in the full $8,500 scholarship (second half, for the spring school term) to his tax return, it generates Other Income and Form 8615 (Tax for Certain Children Who Have Unearned Income) - since his total income is now above the standard deduction. Form 8615 results in him owing Federal and NY state taxes - almost exactly equal to the increase in Federal taxes we would owe if the $8,500 scholarship was fully added to our income (however, there is no impact to our NY state taxes). I am assuming that is the purpose of Form 8615. However, I note in one of your previous responses (re 2022) that you stated: "Since the student only has $4000 of income, you also have the option of him reporting some or all of the $8500 as taxable scholarship income." Does that mean that, for 2023, I can split the reporting of the $8,500 scholarship - on his return, report $5,600 so that his total income doesn't go above the $13,850 standard deduction (resulting in no Federal taxes and some NY state taxes owing) and report the remaining $2,900 on our return (resulting in some Federal taxes and no NY state taxes)? The tax impact of splitting it this way is, obviously, favorable to adding the full $8,500 to either his return or to ours. Just wanted to confirm that splitting it this way is allowed and what you meant by that comment. Thanks again!
