Dependent Child Who Received More Scholarship/Grant than Tuition: Who's Reporting His Income?

[ay]

I'm a parent of a 19-year-old full-time college student.  He is a dependent child who lives with us for 12 months per year.  My question is regarding to who is filling for his taxes for 2022: him, his parents or both.

1) We cannot file Form 8814 for him. He has both unearned and earned incomes.  He made less than  $1150 in unearned income, and below $12,950 in earned income, but has some money withheld on W-2.

2) He has received more scholarship/grant money than tuition and other educational expenses (books, etc.) combined.  He did withdraw money from his 529 plan to pay for tuition, and then received refund checks from the school later.  All the money he received from the scholarship and grant went to his 529 investment.

My questions are:

a) Is my son responsible to report all the incomes (dividends, part-time jobs, scholarships) together  to IRS?  If so, are we supposed to remove him as a dependent child  (assuming his income will remain the same or increase)?  Or, do we, the parents, report his scholarship income as our own while our son reports dividends and part-time job incomes?

b) Once removed, can we re-claim him as a dependent child, if circumstances change, such as no scholarships, no part-time jobs, etc.?

[ErnieS0 · Accepted solution]

Your son doesn’t have to file a return, but he can file to receive a refund on his withholding. Some states have lower filing limits so it’s possible you may have to file a state return but not federal one.

He will report Form 1098-T and taxable scholarship on his tax return.

You can still claim your son as a dependent as long as you provide more than half his support.

The IRS has a great app for that: Whom May I Claim as a Dependent?

Tax Champ Carl says: 

If the scholarships/grants exceed the qualified education expenses, then the student will report the 1098-T and all other educational expenses and scholarships/grants on the student’s tax return. The student will pay taxes on the amount of scholarships/grants that are not used for qualified education expenses. However, if the student’s earned income reported on a W-2, when added to the excess scholarships/grants does NOT exceed $xxx, then the student doesn’t even need to file a tax return, and nothing has to be reported.

See the full discussion at "I claim my son as a dependent. He has a taxable scholarship. Do I claim that income on my return or...

If your son’s income is still below the filing threshold with the addition of scholarship income, then he does not have to file, unless he wants his refund.