#43488 - 06/17/08 10:38 AM
Scholarships...taxable?
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X terminator
Registered: 03/08/07
Posts: 55
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Are scholarships taxable income? Does it depend on the source of the scholarship?...such as a college, high school, private school, trade school, summer camp, day care, etc.
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#43490 - 06/17/08 02:48 PM
Re: Scholarships...taxable?
[Re: X terminator]
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bwilk
Registered: 05/14/01
Posts: 3281
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I know I never paid taxes on any scholarship.
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#43491 - 06/17/08 05:16 PM
Re: Scholarships...taxable?
[Re: X terminator]
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itstoomuch
Registered: 01/01/06
Posts: 745
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Well now, that's an interesting question. Lets broaden the question:
Are Scholarships, Guaranteed Student Loans, Fellowships, Internships, and Grants taxable? 
Answer: Depends. How do I know, because couple of thousand for tax accountant (who was wrong), many hours on tax program, detailed reading of publication 970, reading of the loan, scholarship, internship, fellowship contracts and told to me by college aged S.
However, in some cases, it is better to be taxed on excess rather than not taxed on not enough. I give you the example of a scholarship that exceeds tuition and mandatory fees by $1000. So even paying the appropriate taxes from the $1000, there would still be enough to purchase food and supplies. Contrasting to a shortfall of $1000, where either tightening of the belt or working (make gross $1250 to take home $1000 net.)
each situation is different, consult your guru.
Edited by itstoomuch (06/17/08 05:16 PM)
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#43499 - 06/18/08 03:11 PM
Re: Scholarships...taxable?
[Re: itstoomuch]
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itstoomuch
Registered: 01/01/06
Posts: 745
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"Does it depend on the source of the scholarship?"
I don't believe it does. In our S case, for grad school, Canada, which included scholarship, TA, fellowship. The combination exceeded the cost of attendance and the portion that exceeded tuition was and is US taxable. Our tax accountant did not investigate whether the total amount of his funding was more than the tuition, even though we had supplied her with the school's award letters which stipulated that the awards did exceed the tuition and was for living expenses.
We have a question if the excess money , which is foreign sourced, is really US taxable. We assume that even though the money is foreign, S will pay the tax; the cost-benefit for additional time/cost for the accountant vs the tax is such that paying the taxes is better; And if anything, avoids an adverse tax audit.
S is still financially ahead.
Edited by itstoomuch (06/18/08 03:17 PM)
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#43500 - 06/18/08 05:06 PM
Re: Scholarships...taxable?
[Re: itstoomuch]
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Joe Hurley
Registered: 01/07/00
Posts: 2075
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Taxes are never that easy. Check out the details from Publication 970.
Sometimes you want to claim a scholarship as taxable even when it could be tax-free. If my federal tax bracket is only 15%, but I can get a 20% Lifetime Learning credit or better yet a 75% Hope credit, the math is clearly in favor of reporting the scholarship as income and claiming the credit on the tuition "paid" with that income.
Joe
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#43501 - 06/18/08 05:09 PM
Re: Scholarships...taxable?
[Re: itstoomuch]
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X terminator
Registered: 03/08/07
Posts: 55
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I asked...because we got a "scholarship" from kids summer camp. Was expecting $1500 and got a check for $1200...called and was told the difference was withheld for income taxes.
Now, they called it a scholarship...but perhaps it actually (technically) something different and thus taxable. We already paid in full the cost for the camp and were reimbursed this "scholarship" money.
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#43502 - 06/18/08 08:29 PM
Re: Scholarships...taxable?
[Re: X terminator]
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itstoomuch
Registered: 01/01/06
Posts: 745
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Reads like a discounted rate, or a rebate of fees. I think you will have your problem with the camp rather than with the IRS. You will definitely know the situation on the 1099.
Now, do you want to solve S tax problem? Three countries, one foreign school, and a US company with subsidiary in another country.
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