Segal (Americorps) award

[Buffalochip]

I've entered the Segal award for my daughter (21 years, graduated December 2021) reported on the 1099-MISC using the Wages & Income, Less Common Income, Miscellaneous Income path as reported in previous posts.  She earned this money while working in the summer of 2021 before she graduated.  Because the unearned income ($2929) exceeded $2200 by $729, I had to report my taxable income and qualified dividends.  It appears that some amount of my daughters unearned income, perhaps $729, will be taxed at my marginal tax rate, which is termed the kiddie tax.  This unearned income does not derive from investments but results from her working with Americorps, which paid next to nothing in income.  Is there a way to designate this unearned income such that it is not subjected to the kiddie tax?  

[DaveF1006]

Since your child has no unearned income such as interest, dividends, capital gains, she will need to file her own tax return but your daughter must indicate on the return that she can claimed as a dependent by someone else. 1099-MISC income is earned income.

[Buffalochip]

I should clarify that this question came up whilst preparing her tax return, which I was doing anyway because of other earned income.  I didn't know how to enter the 1099-MISC amount on her return but prior posts of this nature led me to enter it as less common income as I mentioned.  Since the amount exceeded $2200, the first $1100 is tax-free and the second $1100 is taxed at her marginal rate, which would be 10%.  However, the remainder is taxed at the marginal rate of the parent.  Since this was an educational award paid directly to the school, I was wondering if there is a way to enter the information and 1) pay no taxes or 2) only pay taxes at her rate.  

[KrisD15 · Accepted solution]

Taxable scholarships are entered on line 1 of the 1040 and can be treated as "earned income'; however, the IRS is still treating the Segal Award as "unearned income" reported on line 8.

All payments made using the Segal AmeriCorps Education Award are subject to federal tax in the year each payment is made.  Additionally, payments are considered taxable income regardless of whether they are used to pay current educational costs or to repay qualified student loans, unlike scholarships which are tax-free if used for qualifying education expenses.

AmeriCorps LINK

According to the IRS:

"..., Segal AmeriCorps Education Awards are taxable in the year they're paid. If you receive an award and the payment was $600 or more during the year, you should receive a 

Form 1099-MISC, Miscellaneous Income. The 1099-MISC will show the amount of the award in box 3, Other Income. There is no withholding on this payment unless you failed to provide your taxpayer identification number. Report the payment amount on the "Other income" line 8h of Schedule 1 (Form 1040) PDF and attach to Form 1040, U.S. Individual Income Tax Return or Form 1040-SR, U.S. Tax Return for Seniors, even if you don't receive Form 1099-MISC."

IRS LINK