FAFSA and scholarships

[SharoninTennessee]

How are you supposed to handle scholarships on your taxes? Do you list the scholarship income and then list the expenses or do you just list any scholarship income that is in excess of tuition? What about books, do you factor in their expense? If you do include scholarship income, where on the tax form do you list it?

 

We were told that you didn't list scholarships since they're covering expenses, but the FAFSA very clearly asks how much scholarship income you claimed. Want to make sure we do it right.

 

Thanks,

Sharon

[Lori D.]

Start with the Federal Student Aid Information Center's free hotline: 1-800-4-FED-AID (1-800-433-3243) for questions about federal student aid, including questions about completing the FAFSA.

 

Also, try this VERY informative article: FinAid: Taxability of Scholarships. And this article, Fast Web: Is Your Scholarship Taxable?, which also addresses whether or not scholarships are taxable/need to be declared.

 

If still confused or have ANY doubt, definitely consult a tax specialist. BEST of luck! And congrats on the scholarship monies! :) Warmest regards, Lori D.

[Kareni]

IRS Publication 970 "Tax Benefits for Education" discusses this. Scholarship income that is not used for tuition, books, or some fees is taxable.

 

See page 6 of 88 of Publication 970. There it says,

 

"Form 1040A.

If you file Form 1040A, include the taxable

amount in the total on line 7. If the taxable amount was not

reported on Form W-2, also enter “SCH†and the taxable

amount in the space to the left of line 7."

Different directions are given for the various tax forms (such as 1040EZ, 1040, etc.).

Regards,

Kareni

[SharoninTennessee]

Thanks! We have an accountant and that's what he said, but something about the way it was worded on FAFSA made me second guess it.

[Kareni]

I'm glad you got it figured out, Sharon. We had to educate our accountant as the way to do it!

 

Regards,

Kareni