Can I claim I provide more than my half support if my scholarship covers all my support?

[mohad62]

I am getting a very generous scholarship (from overseas) to study in the US which covers all my college and living expenses, with money to spare and save. No W-2 or any other US tax forms are issued. I am a green card holder. I have no earned income and my parents are not contributing to my support.

Will the ( scholarship minus qualified educational expenses ) be taxed at Estate/Trust tax brackets, or can I be considered as effectively "providing more than half my support with earned income", thus avoiding form 8615 and getting taxed at the much lower Single filer tax brackets? 

[SweetieJean]

Why are you asking about Estate/Trust?"

[mohad62]

SweetieJean: Prior to 2018, unearned income for those under 18 or for full time students under 24 are taxed at their parents rate (kiddie tax). Starting with 2018, it gets taxed at the much harsher Estate/Trust rate... Nuts but true. This kiddie tax is avoidable if the person is providing more than half their support with earned income. My hope is to claim that my net support expense is zero,  therefore kiddie tax is not applicable even though my earned income is zero.

[SweetieJean]

How old are you?

[mohad62]

18

[SweetieJean]

I am aware of that.

[SweetieJean]

@TaxGuyBill Can you help?

[SweetieJean]

<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/4332437-under-the-new-tax-law-for-2018-will-the-taxable-part-of-sc...>

[TaxGuyBill]

Yes, you will be subject to the Kiddie Tax.

For purposes of the Kiddie Tax (and ALMOST everything else), "earned" means wages and self employment income.  So you did not provide your support with "earned" income.

The confusion about this subject is that for purposes of the Standard Deduction, scholarships are considered "earned", so you can use the full $12,000 Standard Deduction.  But for the Kiddie Tax (and everything else), scholarships are "unearned" so you are subject to the Kiddie Tax.

[mohad62]

Thanks for the clarification. The new tax law has exponentially increased the Kiddie Tax bill for many, it seems.

[SweetieJean]

@TaxGuyBill  So this article is wrong?
<a rel="nofollow" target="_blank" href="https://ktllp.com/new-kiddie-tax-rules/">https://ktllp.com/new-kiddie-tax-rules/</a>

[TaxGuyBill]

Yes, it is wrong.  There is nothing that exempts scholarships (unless they are tax-free scholarships due to being applied against tuition).

[SweetieJean]

Okay.  Thanks.

[Vanessa · Accepted solution]

No, scholarship money is NOT earned income. 

[SweetieJean]

Kiddie tax relates to UNearned income.  Some sources say Scholarships are included, but others say no.
<a rel="nofollow" target="_blank" href="https://www.cnbc.com/2019/03/11/you-might-owe-taxes-if-you-got-a-scholarship.html">https://www.cnbc....>
<a rel="nofollow" target="_blank" href="https://ktllp.com/new-kiddie-tax-rules/">https://ktllp.com/new-kiddie-tax-rules/</a>