College Athlete Income

[Snaggletooth]

NCAA schools profoundly refuse to pay their athletes, at least on the surface.
However, just saw a 1098T for a prolific female volleyball collegiate athlete. Amount shows in "scholarship" box for a healthy amount of money which equalled the amount of tuition charges.

There has been discussion of some circumstances where it may benefit the taxpayer to show the scholarship as "income" and then take full credit for tuition as an Education Credit.

The circumstances where this is allowed appear to always include the student being required to "work" or provide services for the college, as opposed to just getting "free" grant and scholarship money.

Would a college athlete's scholarship be considered a requirement to "work" for this money such that the scholarship could be claimed as income??

[FEDUKE404]

Playing the game

I've never been "blessed" with such a client situation, but it has always been my understanding that anyone who receives a major full ride scholarship would definitely have a taxable income aspect to some of the funds received.

The Form 1098-T, on the surface, sounds correct - for whatever that's worth. I might be curious about the exact offsetting scholarship entry, however. And is it not likely that a Form 1099-MISC is also out there somewhere???

It's kinda the reverse of the rules for education credits - if you get paid for room/board/whatever that never would be a "qualifying expense" in the first place, then that portion of the scholarship becomes taxable income.

As for any education credits, I would assume the logic there is they had qualifying expenses, the scholarship paid those expenses, thus that is a push.

FE

[Golden Rocket]

No 1099-MISC

Should not be a 1099-MISC if there were no cash payments.

Obviously what is at stake for $15,000 if it can be classified as line 21-type income:
Very little tax bracket if this is all she earned, but the full contingent of American Opportunity Credit. Not enough tax liability to accommodate all the credit, but remember 40% of the credit is refundable.

As incredible as it may sound, student can claim this as income and parents still claim the student as a dependent. According TTB, amounts claimed from scholarship do not enter the mix in the dependency test.

[Burke]

Don't accept the 1098-T as gospel. I am asking for transcripts on all these and I am finding a lot of colleges (not all, but a lot) are routinely showing any subsidized or unsubsidized loans in the "scholarship" figure on the form. Which, of course, is incorrect.

[Gary2]

Should not be a 1099-MISC if there were no cash payments.

Obviously what is at stake for $15,000 if it can be classified as line 21-type income:

Usually scholarship income would be on line 7. It can be reported on a W-2, but if not, there would be a line 7 notation of SCH. The advantage, in many cases, of having it on line 7 is that it qualifies for the "earned income + $300" standard deduction for dependents.

I believe the exception would be scholarships that are really academic prizes.

[Kram BergGold]

My view

To me if the school gives a scholorship that is 100% earmarked for tuition you can't do the report it as income and then take the credit. To me it has to be a scholorship from an outside source or one given by the school that can be used for anything you choose..