Standard Deduction for University Student Claimed as a Dependent

[cjgeiselhart]

I'm a third-year college (20) student filing as a single dependent of my parents. I'm reporting about $3,000 in earned income from campus jobs/gig work and $20,000 in taxable scholarships (university gift aid and Pell grants used to pay for travel, room/board, etc.). I assumed that because I am being claimed as a dependent, my standard deduction would be limited to my earned income +$450, so only about $3,450. However, TurboTax (and other tax softwares I have worked with) are giving me the full standard deduction amount of $14,600. I have verified that I have marked myself as being as claimed as a dependent, and I believe the (taxable) scholarship is being entered into line 8r of the Schedule 1 as a scholarship/fellowship not reported on a W2.

While I certainly prefer the greater deduction, I'm confused to how I qualify for it, since I thought that taxable scholarships counted as unearned income. Any clarification would be greatly appreciated, thank you!

[DianeW777 · Accepted solution]

Scholarships are a mix of earned income and unearned income. It is considered earned income for purposes of the $14,600 filing requirement of a single individual and the dependent standard deduction calculation (earned income + $400).  It is not earned income for the 'kiddie tax' and other purposes (such as earned income credit).  In your case you would have a higher standard deduction because of the taxable portion of your scholarship(s).

The rules for claiming a dependent for your parents can be reviewed at the link below.

• Who can I claim as my dependent?
  • The key in your situation is that you must not have provided more than half of your own support. 
    • Note: Scholarships are not taken into account when determining whether you paid more than half of your own support.  IRS Dependents, page 6-4

[cjgeiselhart]

Thank you so much for the prompt and clear explanation, I really appreciate it!