When calculating support for the kiddie tax, do I have to include the cost of college tuition if college was free for me?

[ihatetheirs]

I started college last fall, I am a full time student, 18 years old, at least one parent alive. Therefore I might be subject to the kiddie tax if my income is less than half my support. Do I have to include the cost of tuition when calculating my support if I received a scholarship to cover the cost of tuition?

I know the IRS says that scholarships can't be counted as me supporting myself, but is the cost of tuition part of my support? I wasn't billed tuition by the school, but the school did issue me a 1098-T with what appears to be the in-state tuition rate on it. So in a way, nobody paid my tuition (the school probably wrote it off?) and school was just inherently free to me, but tax documents show that I got a scholarship for school...? I didn't receive any money in my bank account that I used to pay the school; one department paid another department (or at least that's what it seems like) for me to attend.

If I do need to count the tuition amount in my support, is it the in-state or the out-of-state rate that is part of my support? The 1098-T appears to show the in-state rate (because of my scholarship, the school probably gave me a waiver of my out-of-state status?) but I am actually out-of-state.

Furthermore, I have self employment income, and as such I could deduct less business expenses to keep my earned income greater than 50% of my support (if I count one semester of in-state tuition as part of my support). Can I do this? Do I have to deduct business expenses if it's favorable to me to not deduct them?

Thanks!

[DianeW777]

Do I have to include the cost of tuition when calculating my support if I received a scholarship to cover the cost of tuition?

No. As written by the IRS, the specific language is below if this was a scholarship. The rules for a scholarship are clear.

Scholarships.

A scholarship received by a child who is a student isn't taken into account in determining whether the child provided more than half of his or her own support. 

• For more information use this link: IRS Publication 501.

I have self employment income, and as such I could deduct less business expenses to keep my earned income greater than 50% of my support (if I count one semester of in-state tuition as part of my support). Can I do this? Do I have to deduct business expenses if it's favorable to me to not deduct them?

Yes. you must account for and use your business expenses. As far as the self employment income, it is important to enter all income received and any expenses related to earning and obtaining that income.  It's not allowed to adjust your income for a tax benefit. 

To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary. 

• For more information use this link: IRS Publication 535.