Student Scholarship

[tsuewalker]

If a student receives a scholarship that is more than the tuition, does that become income?

Thanks for your help in advance.

[Lion]

Yes.......

[Happy Camper]

Yes with exceptions...

You need to also find out what 'course related expenses' the TP paid. This is not reported on the 1098-T

from: https://apps.irs.gov/app/vita/conten...rship_4012.pdf

Education Expenses
The following are qualified education expenses for the purposes of tax-free scholarships and
fellowships:
• Tuition and fees required to enroll at or attend an eligible educational institution
• Course-related expenses, such as fees, books, supplies, and equipment that are required for the
courses at the eligible educational institution. These items must be required of all students in your
course of instruction.
Qualified education expenses do not include the cost of:
• Room and board • Travel
• Research • Clerical help
• Equipment and other expenses not required for enrollment in or attendance at an eligible
educational institution

[mastertaxguy]

Wait a minute...

Yes.......

Generally that would be true, but....

Be sure the student actually received a scholarship in excess of qualified tuition, fees and expenses.

If relying on a 1098-T, often Universities/Colleges include as "scholarships and grants" loans or "grants that have to be repaid."

As many have pointed out on this forum, getting a student account transcript is best. In the overwhelming majority of situations our office encounters, what is shown on a 1098-T as scholarship is not a scholarship: there is a pay back requirement.

The other issue is whether the scholarship, which may be on the 1098-T and/or the SAT [student account transcript] was for a future term (semester, quarter, whatever).

[Lion]

The OP didn't ask about Form 1098-T. Are you suggesting a tax professional would rely on 1098-T instead of the records of what was paid by parent, child, scholarship, etc., and spend on tuition vs. room & board, etc.? Don't you rely on the bursar's statement &/or the student &/or parent's accounting?

[mastertaxguy]

Relying on 1098-T only or student account statement....

The OP didn't ask about Form 1098-T. Are you suggesting a tax professional would rely on 1098-T instead of the records of what was paid by parent, child, scholarship, etc., and spend on tuition vs. room & board, etc.? Don't you rely on the bursar's statement &/or the student &/or parent's accounting?

1. Well, I guess I was suggesting that some tax pros rely only on the 1098-T. It does happen. It wasn't clear from the original post if the preparer was relying on 1098-T or other documentation.

2. Yes, our office PREFERS a student account statement from whomever issues them at whatever higher education facility is involved. As far as parents accounting goes, I will leave that to others to comment on. Our experience is that parents combine sorority/fraternity housing and dues, sporting event tickets and trips (NCAA tournaments and bowl games) and the like as higher education expenses.

3. The reality is that occasionally all we have to work with is the 1098-T. When the scholarship/grant box is blank (which does happen) it is of course relatively easy to compute education tax benefits, after we, of course, verify there was not third party scholarships or "grants." IF the box 5 is higher than tuition billed, we of course look for the actual amount paid if any in box 1.

4. Sometimes, what is listed as a scholarship or grant is "work study" or something like that.

[Snaggletooth]

One College won't issue a 1098-T

Cumberland College (Lebanon, TN) as a matter of policy will not issue a 1098-T if the scholarships/grants exceed the qualified tuition paid. I haven't talked with them, but it is on their website without explanation. It is in the FAQ about 1098-Ts.

The standard answer for the eternal 1098-T problems is: get the true records from the parents. This presumes the parents know what is really needed and then actually have the records.

The IRS could change the preparation instructions for the 1098-T and most of the colleges would comply. In fact, most of the colleges have course curriculum with instructors/professors of Accounting and Taxation. This could get rid of the arcane Fall Semester and billings to coincide therein -- and move to a calendar year basis versus money actually received.

[Lion]

Amen! Amen!

[Burke]

If you want to circulate a petition, I WILL SIGN!!!

[kathyc2]

For 2016 forms box 1 will be required to be filled in.

[Lion]

But, we still have the problem of tuition being due in December for spring semester the following year when scholarship money finally arrives in January for spring semester. The biggest issue comes graduation year when no tuition is paid during that calendar year, but scholarship funds arrived and show on the 1098-T. I'll still want to see the report from the bursar's office with all the ins and outs by date.

[mastertaxguy]

But does this answer the question? Scholarship over Tuition amount billed?

a. The original post asked if a scholarship in excess of tuition was taxable.
b. The first reply said yes.
c. Since the scholarship may have covered required books, materials, fees, and so on, the answer I suggested is "wait a minute..." and find out what is going on.
d. If that requires a student account statement (or whatever you want to call it), fine.
e. The point of my"wait a minute.." post was to FIND OUT WHAT THE FACTS ARE before drawing a conclusion that the perceived excess scholarship was taxable. Maybe the box was checked on the 1098-T for scholarships in a subsequent year.
f. A blanket "it is taxable" is not necessarily correct. The poster probably has figured out the answer already based on the information they have.

[FEDUKE404]

Scholarship may be taxable but more facts needed

I think the original question was poorly worded (replace "tuition" with "qualifying expenses" for starters). And then other (unstated) facts also become relevant.

As for what Cumberland College does: I have a client who has been on a "full" merit scholarship throughout her undergraduate schooling. There was taxable "scholarship" income reported each year on line 7 of Form 1040 with "SCH" added. And her school DID issue a Form 1098-T for every year of attendance.

(I do think there is a slightly different set of Form 1098-T rules in a situation such as where GI bill pays the costs? ? ?)

FE