Should I fight to waive DD's insurance?

[Ann.without.an.e]

DD has health insurance through DH's work that is sufficient to have the Duke insurance waived. We went through the waiving process, it was accepted, then it was denied because her insurance is covered under her scholarship.  She received a BCBS card for her school insurance, etc.  The thing is .... she is already covered through DH.  The school's insurance does have a lower deductible and copayments (ours has no coverage until she hits our high deductible).  It is a better plan.  But, will DD have to pay taxes on the insurance coverage she gets through her school?  She doesn't go to the doctor very often so it might not be worth it for her if she has to pay taxes on it.  I hate to make a big deal out of things.  I mean, who wants to complain if the scholarship their child is on keeps wanting to pay for more and more coverage?  I just hate for it to cost dd more money in the end.  

Edited July 24, 2017 by Attolia

[Granny_Weatherwax]

That is a good question. Can you call your tax professional or an accountant?

[JanetC]

Is she likely to be in a high tax bracket? I'm wondering what the exact financial cost of accepting better insurance would be. Especially if you are not claiming her as a dependent and she gets her full standard deduction.

[Ann.without.an.e]

That is a good question. Can you call your tax professional or an accountant?

 

 

I've called several tax accountants and they know nothing.  According to them, dd won't pay taxes on her scholarship at all and we all know that isn't true.  IRS website even states she will pay tax.

Edited July 24, 2017 by Attolia

[Ann.without.an.e]

Is she likely to be in a high tax bracket? I'm wondering what the exact financial cost of accepting better insurance would be. Especially if you are not claiming her as a dependent and she gets her full standard deduction.

 

 

I have no idea.  She is a dependent but she will "make" enough money (since her room and board and stipend will count as income) that she will have to file her own return.  I have no idea if the tax on this is bad or not.  She's my oldest and she's never made enough to file independently.

Edited July 24, 2017 by Attolia

[*LC]

Scholarships that pay for required fees are not taxable, and I think you have a good claim that this is a required fee since your daughter was told it cannot be waived. Of course, what the IRS thinks and what I think could be different.

 

My kids' school does not require health insurance, so I have never dealt with that. So, I looked it up and there isn't a lot of information. There is some talk about it for grad students, for whom this would come up more often.

 

 

I liked this site http://www.gradstudentfinances.org/grad-student-tax-lie-6-you-dont-have-to-pay-tax-on-the-scholarship-that-pays-your-health-insurance-premium/

 

Here is the most relavent part "It may be the case that other universities require their graduate students to buy health insurance from the university as a condition of enrollment. Those health insurance premium would be a required fee and therefore a qualified education expense. The scholarships that pay health insurance premiums at those universities could therefore become tax-free for the students. How universities provide health insurance for their students is currently a rapidly changing landscape due to the Affordable Care Act, so this designation could even change from one year to the next at the same university. If you are receiving a scholarship that pays your health insurance premium, be sure to check each year to see whether it is a required fee.

 

Whether health insurance premiums at universities are qualified education expenses for the purpose of making a scholarship tax-free is a confusing question, even for the IRS. Kathleen shared in a comment below (from 3/27/2016) that she talked with an IRS helpline agent who confirmed that at her university the health insurance premium was a qualified education expense for the purpose of making a scholarship tax-free. I also called the IRS helpline about this issue on 4/1/2016. At first, the agent I spoke with stated that the health insurance premium was a qualified education expense, then after better understanding the scenario at my own alma mater she reversed her position to say that it wasn’t. After further discussion, we left the conversation with her leaning toward the premium not being a qualified fee, but not completely sure. With this confusing and conflicting feedback from IRS helpline agents (who have no more information available to them than what is public), perhaps it can be called a gray area. (If you have called the helpline about this issue, please leave a comment on what you were told!)

 

If you decide to make the scholarship that pays your health insurance premium tax-free, be prepared to justify to the IRS (if it asks) that your health insurance premium was a required fee with written documentation of your university’s policies."

 

It also had this about 1098s and health insurance. "A quick note on 1098-Ts: A student’s health insurance premium should not be listed in Box 1 or 2, which is one point of reference for determining the amount of qualified education expenses a student has in the course of a year that the IRS may rely on. (Please add a comment if your university does list the premium in Box 1 or 2.) It is acceptable to include more (or fewer) qualified education expenses in your tax calculations than what is listed on your 1098-T, especially because of the varying definitions of a qualified education expense."

 

It is amazing how complicated things can be.

[JanetC]

If you have a copy of turbo tax, create a dummy return and throw in some estimates.

[Hoggirl]

https://www.irs.gov/individuals/qualified-ed-expenses

 

This is on a different topic and doesn't directly answer your query. However, this specifically lists insurance as an expense that does not qualify as an education expense right alongside room & board and the other things that *are* taxed when received as a scholarship. I would *guess* that the concept/definition carries over to the other side of the coin, so to speak. So the things that qualify here as educational expenses would be the ones that would not be taxable while those that don't qualify would be taxable if received by the student. It gives an activity fee as an example of a required fee.

 

Sorry, im not wording this well at all. Tired.

Edited July 25, 2017 by Hoggirl

[katilac]

Unless the insurance fee is extreme, I probably wouldn't worry about it. Scholarship taxes aren't too bad, and the campus medical center is very unlikely to taker the insurance she already has, and is of course very convenient. Even if you have a car on campus, you don't want to drive to the doctor when you're sick. Most campus medical centers also automatically give you a note whenever you are seen, whereas you will have to remember to ask for one at the regular doctor. 

 

She may not get sick often, but remember she will now be living with hundreds of people in close quarters! If she was homeschooled before, that is a big change. Even if she went to school, she wasn't living in a dorm. I can tell you that many college students lack the proper respect for germ theory  :001_rolleyes: