Scholarships and taxes

Elin

So, I just got notice that I was awarded a big ass scholarship. Like, 10k a year for 2 years. Now, the way I understand it, any part of the scholarship that doesn't pay for tuition and books is going to need to be reported as taxable income, is that correct? The financial aid office said "some students report and some don't, but we can't really give any tax advice here."

So, should I be planning to save X amount of this scholarship to pay Uncle Sam next February?

fightinfilipino

Elin wrote: »

So, I just got notice that I was awarded a big ass scholarship. Like, 10k a year for 2 years. Now, the way I understand it, any part of the scholarship that doesn't pay for tuition and books is going to need to be reported as taxable income, is that correct? The financial aid office said "some students report and some don't, but we can't really give any tax advice here."

So, should I be planning to save X amount of this scholarship to pay Uncle Sam next February?

err, well, how much is your annual tuition? are you sure the scholarship isn't going to go directly to paying that?

tinwhiskers

IANAA
1) are you a dependent
2) are you working.

Even claimed as a dependent you still get the standard deduction which was something like 5700 dollars last year. And the first 8k above that is only like 10% tax rate.

So if you are unemployed and pay more than like 4.5k for tuition+books(save your book receipts) every 2 semesters, you will probably be fine.

If you are part time wage slaving over summer(and a dependant) you may end up with some tax liability, but your withholding should handle that.

Spacemilk

IANAA or L

Anecdotal: In Indiana, I went to a college where I was paying 8.5k a year for room+board. I applied my scholarships to my final bill, which happened to include room+board, without realizing that it was "taxable income" if applied to my living expenses. At some point someone caught on and sent my parents a letter, which ended up in me owing $1.5-2k per year as taxes on the 8.5k for R&B. That sucks, since I could have lived off-campus for less than that... anyway, the point is, I felt rather violated by how much they taxed me on that. So yeah, save up for it. It was a pretty big deal for me at the time.

As a side note, I was claimed as a dependent on my parents' tax return, as well as maintaining a part time job over the whole year - going full time in the summer - soooo I think that meant I could not take the $5700 deduction? It's been a few years, so I can't really remember. Anyway, hope that helps!

oh and side side note: I think that you can call some tax companies and ask them basic questions like this and they will give you 5 minutes to help you out. Alternatively doesn't TurboTax or whatever have online chat or something like that? I'm at work right now, I'll try to look up both these things when I get home - the point is, in matters like taxes it's best to spend a few minutes talking to a pro!