Is a Veteran Affairs Scholarship for a dependent attending college full time taxable for the portion of the scholarship used to pay for room and board on-campus expenses?

pan — Thu, 06 Jun 2019 15:20:07 GMT

My daughter received a VA Scholarship. We are finding conflicting information if the scholarship portion used for room, board, etc, is counted as taxable income. We have been told according to IRS Publication 970 that "Payments received under any law administered by the Department of Veterans Affairs (VA) are tax free." Her scholarship is administered by the State Department of Veterans Affairs. I can't find a way to answer this in the software or if I should be checking the box for for a scholarship for her or if the box is referencing ROTC, GI Bill, etc for a veteran themselves receiving direct benefits in the form of a scholarship.

It doesn't seem to make sense to me that an award of 100% VA scholarship would go to a student then they would be expected to pay taxes on the funds used for the non-tuition/books/fees portion of their education expenses?

She also had additional earned income from an on-campus job of $4000 as she is saving money to attend graduate school.

NO. The confusion you are running into concerns the fact...

KrisD — Thu, 06 Jun 2019 15:20:08 GMT

NO. The confusion you are running into concerns the fact that some tax-free assistance may be claimed as income so that the education expense might be used to apply for an education credit. Funds from a Veterans Affairs program cannot be used this way. In other words, if the VA pays a students tuition, that tuition cannot be used to claim an education credit.

VA payments are never taxable, including payments you used for room and board.

According to the IRS:

“Veterans' Benefits

Payments you receive for education, training, or subsistence under any law administered by the Department of Veterans Affairs (VA) are tax free. Don't include these payments as income on your federal tax return.

If you qualify for one or more of the education tax bene-fits discussed in chapters 2 through 12, you may have to reduce the amount of education expenses qualifying for a specific tax benefit by part or all of your VA payments. This applies only to the part of your VA payments that is required to be used for education expenses.

You may want to visit the Veterans Administration web-site at for specific information about the various VA benefits for education. www.gibill.va.gov

Example. You have returned to college and are receiving two education benefits under the latest GI Bill: (1) a $1,534 monthly basic housing allowance (BHA) that is directly deposited to your checking account, and (2) $3,840 paid directly to your college for tuition. Neither of these benefits is taxable and you don't report them on your tax return. You also want to claim an American opportunity credit on your return. Your total tuition charges are $5,000. To figure the amount of credit, you must first subtract the $3,840 from your qualified education expenses because this payment under the GI Bill was required to be used for education expenses. You don't subtract any amount of the BHA because it was paid to you and its use wasn't restricted.”

For more information, click the link below:

CLICK HERE for IRS Pub 970 Education Credits

topic Is a Veteran Affairs Scholarship for a dependent attending college full time taxable for the portion of the scholarship used to pay for room and board on-campus expenses? in Education

Is a Veteran Affairs Scholarship for a dependent attending college full time taxable for the portion of the scholarship used to pay for room and board on-campus expenses?

NO. The confusion you are running into concerns the fact...