Amount I should use for taxes

[billmcse]

My son is a FT Student and works PT. For his schooling, he received more money than his tuition and expenses. I know he has to claim the surplus as income but here is my specific question:

He started in fall 2023 and the school reported his scholarships for BOTH fall and Jan 2024 semester. Half of the amount he received in scholarship money is actually for 2024. Does he need to report the full amount because that is what is in box 5 or can he just report the money he received for fall (2023) because this is 2023 taxes?

[AmyC]

The scholarship money must be reported  for 2023. Reduce the amount by the box 1 tuition. Depending on the situation, he may need to claim the kiddie tax as well. 

• Scholarship income is a hybrid of earned income and unearned income.
• Earned income  for purposes of the filing requirement - Single $12,950 
• Earned income for the and dependent standard deduction. - earned income + $400 
• Unearned income for purposes of the kiddie tax and other 

References:

IRS Scholarship interaction

Topic No. 421, Scholarships

What is the Kiddie Tax?

[billmcse]

So report JUST for 2023 and not the amount for 2024 because the first semester for 2024 is also included on the 1098-T

[AmyC]

Your 1098-T is for 2023 so all of the box 5 scholarship is reported on the 2023 return but it is reduced by all legitimate tuition, fees, books, etc.

For example: Box 1 $10,000 Box 5 $18,000.

This goes into return and the program will automatically subtract box 5 minus box 1 to create taxable income. You can enter any other expenses paid from the scholarship money to reduce the amount more.

If you paid 2024 tuition in 2023, it can be included on the 2023 return.  Tuition paid for the first 3 months of the next year also qualify, See page 12, What Expenses Qualify at IRS Publication 970, Tax Benefits for Education.