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Level 1

I claim my son as a dependent. He has a taxable scholarship. Do I claim that income on my return or does he? He has other income and files a return.

My son is in college.  I claim him as a dependent on my return.  He received a 1098-T.  He received more in scholarships (box 5) than what he had in eligible expenses, resulting in a taxable scholarship.  That amount appears on the dependent student information worksheet but that amount did NOT flow through to Form 1040 Line 7.  My son had other income also an files his own return.  Which one of us claims the taxable scholarship amount on their return, the student or the parent?Thank you.

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Level 20

I claim my son as a dependent. He has a taxable scholarship. Do I claim that income on my return or does he? He has other income and files a return.

It depends on a number of factors. Understand that figuring out who claims the student as a dependent, and determining who claims the education expenses & credits, is two different determinations. It depends on the specific situation as outlined below.

Here’s the general rules gisted from IRS Publication 970 at http://www.irs.gov/pub/irs-pdf/p970.pdf

If the student:

Is under the age of 24 on Dec 31 of the tax year and:

Is enrolled in an undergraduate program at an accredited institution and:

Is enrolled as at least a half time student for one academic semester that begins during the tax year, (each institution has their own definition of a half time student) and:

the student provides less that 50% of the student's support (schollarships/grants received by the student do not count as the student providing their own support)

Then:

The parents will claim the student as a dependent on the parent's tax return and:

The parents will claim all schollarships, grants, tuition payments, and the student's 1098-T on the parent's tax return and:

The parents will claim all educational tax credits that qualify.

If the student will be filing a tax return and:

The parents qualify to claim the student as a dependent, then:

The student must select the option for "I can be claimed on someone else's return", on the student's tax return. The student must select this option ieven f the parent's qualify to claim the student as a dependent, and the parents do not claim them.

Now here’s some additional information that may or may not affect who files the 1098-T. If the amount of scholarships/grants exceeds the amount of qualified education expenses, the parent will know this when reporting the education on their tax return, because the parent will not qualify for any of the tax credits. (They only qualify for tax credits based on out-of-pocket qualified expenses not covered by scholarships/grants.)  Also, the parent’s will not qualify for the credits depending on their MAGI which is different for each credit, and depends on the marital status of the parent or parents.

In the case where scholarships/grants covers “all” qualified education expenses, the parent’s don’t need to report educational information on their dependent student at all – but they still claim the student as a dependent if they “qualify” to claim the student.

 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 $6100, then the student doesn’t even need to file a tax return, and nothing has to be reported.

If the student has any other taxable income not reported on a W-2, and it exceeds $400, (not including taxable portion of scholarships/grants) then most likely it’s considered self-employment income. That will require a tax return to be filed and the student will have to pay the Self-Employment tax on that income.

Finally, regardless of the student’s W-2 earnings, if any taxes were withheld on those earnings and it was less than $6200, then the student should file a tax return so as to get those withheld taxes refunded.

 


14 Replies
Level 20

I claim my son as a dependent. He has a taxable scholarship. Do I claim that income on my return or does he? He has other income and files a return.

It depends on a number of factors. Understand that figuring out who claims the student as a dependent, and determining who claims the education expenses & credits, is two different determinations. It depends on the specific situation as outlined below.

Here’s the general rules gisted from IRS Publication 970 at http://www.irs.gov/pub/irs-pdf/p970.pdf

If the student:

Is under the age of 24 on Dec 31 of the tax year and:

Is enrolled in an undergraduate program at an accredited institution and:

Is enrolled as at least a half time student for one academic semester that begins during the tax year, (each institution has their own definition of a half time student) and:

the student provides less that 50% of the student's support (schollarships/grants received by the student do not count as the student providing their own support)

Then:

The parents will claim the student as a dependent on the parent's tax return and:

The parents will claim all schollarships, grants, tuition payments, and the student's 1098-T on the parent's tax return and:

The parents will claim all educational tax credits that qualify.

If the student will be filing a tax return and:

The parents qualify to claim the student as a dependent, then:

The student must select the option for "I can be claimed on someone else's return", on the student's tax return. The student must select this option ieven f the parent's qualify to claim the student as a dependent, and the parents do not claim them.

Now here’s some additional information that may or may not affect who files the 1098-T. If the amount of scholarships/grants exceeds the amount of qualified education expenses, the parent will know this when reporting the education on their tax return, because the parent will not qualify for any of the tax credits. (They only qualify for tax credits based on out-of-pocket qualified expenses not covered by scholarships/grants.)  Also, the parent’s will not qualify for the credits depending on their MAGI which is different for each credit, and depends on the marital status of the parent or parents.

In the case where scholarships/grants covers “all” qualified education expenses, the parent’s don’t need to report educational information on their dependent student at all – but they still claim the student as a dependent if they “qualify” to claim the student.

 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 $6100, then the student doesn’t even need to file a tax return, and nothing has to be reported.

If the student has any other taxable income not reported on a W-2, and it exceeds $400, (not including taxable portion of scholarships/grants) then most likely it’s considered self-employment income. That will require a tax return to be filed and the student will have to pay the Self-Employment tax on that income.

Finally, regardless of the student’s W-2 earnings, if any taxes were withheld on those earnings and it was less than $6200, then the student should file a tax return so as to get those withheld taxes refunded.

 


Level 1

I claim my son as a dependent. He has a taxable scholarship. Do I claim that income on my return or does he? He has other income and files a return.

are grants considered support from others on the irs worksheet for determining support dependant?
Level 20

I claim my son as a dependent. He has a taxable scholarship. Do I claim that income on my return or does he? He has other income and files a return.

Re-read the above, as there was a mis-wording which has been corrected now. There is no requirement for the parents to provide more than 50% of the student's support. The requirement is that the student provide LESS than 50% of their OWN support. Also, scholarships/grants DO NOT COUNT as the student providing their own support.
Level 1

I claim my son as a dependent. He has a taxable scholarship. Do I claim that income on my return or does he? He has other income and files a return.

thank you for that.  but is it considered support from others?  so if between myself and other sources had paid more than 50% then he wouldnt have paid over 50%.  i thought i read somewhere that scholarships count as support from others. so its not just between him and myself.  other people and institution may have contributed? thank you again.
Level 20

I claim my son as a dependent. He has a taxable scholarship. Do I claim that income on my return or does he? He has other income and files a return.

For a qualifying child, it does not matter where the support comes from as long as the child him/herself does not provide more that 1/2 of their own support.  A scholarship does not count as support that the child provides.

See IRS Pub 17 under qualifying child support test:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p17/ch03.html#en_US_2014_publink1000170907">https://www.irs.gov/pub...>

" A scholarship received by a child who is a student is not taken into account in determining whether the child provided more than half of his or her own support. "
Level 20

I claim my son as a dependent. He has a taxable scholarship. Do I claim that income on my return or does he? He has other income and files a return.

Also, it doesn't matter if grandma provided 90% of his support, the rest came from scholarships and one percent came from the parents. If the student is your qualifying child dependent, then the parents claim the student as a dependent, and the parents also get to claim all the educational expenses. Remember, there is nothing in the IRS Pub 970 that says the parent has to provide more than 50% of the student's support. The pub says that the student provides *less* than 50% of their *own* support, and it that scholarships and grants do not count as the student providing their own support.
You may wish to use the IRS tool at <a rel="nofollow" target="_blank" href="https://www.irs.gov/uac/Am-I-Eligible-to-Claim-an-Education-Credit%3F">https://www.irs.gov/uac/Am-I-...> to see just what credits you qualify to claim. The TT program figures all this automatically for you. But using the tool for piece of mind doesn't hurt.
Level 1

I claim my son as a dependent. He has a taxable scholarship. Do I claim that income on my return or does he? He has other income and files a return.

So, if I understand correctly, if the student doesn't have any earned income and the taxable scholaarship amount is less than $6100, then niether the dependant student nor the parent need to report the sholarship money?
Level 20

I claim my son as a dependent. He has a taxable scholarship. Do I claim that income on my return or does he? He has other income and files a return.

Correct except the 2015 it is $6,300.
Level 20

I claim my son as a dependent. He has a taxable scholarship. Do I claim that income on my return or does he? He has other income and files a return.

Taxable Scholarships and fellowships are reported on line 7 of the students own tax return with "SCH" next to it, and is earned income, the same as wages, for the filing requirements.

Tuition and other educational credits cannot be claimed by a dependent, but they can be by the taxpayer claiming the dependent if they paid them and otherwise qualify.