Taxable income on the student's return at the student's tax rate might not be much of an issue, even if kiddie tax kicks in, for the family as a whole. In fact, shifting some scholarship funds from tuition to nontuition, such as room & board if permissible by the scholarship, can tax as much as $4,000 at the student's rate so parents can take an education credit against their higher tax rate. You need to run the numbers. If too much of the child's income is kiddie tax/parents' rate, it might not be beneficial. Or, if parents' income is so high that credits are phasing out or gone. Run the numbers. One of the few things you can do after the year ends to lower the tax liability of the family as a whole.
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