Heads up for taxes and Scholarships used for room

[NORWICH89]

I know most know this but just a reminder if your kid used their military scholarship for Room or anything that is not tuition and fees you will owe taxes on that amount as income. Some colleges get paid from the military (AF, NV, A, etc.) for the spring term in Dec. That means that money counts for the year it was issued. Where's my crate of tea?

 

[Redleg92]

Actually, this is not 100 percent accurate. If you paid out of pocket tuition you can offset as you had cash outflow for tuition. Such as you took summer courses. You will get tax form from university showing amt paid vs scholarship. As well, remember your cadet may still not trigger taxes based on total income. As always do not take tax and accounting advise from a forum and you should consult with a tax professional for advice.

 

[NORWICH89]

Actually, this is not 100 percent accurate. If you paid out of pocket tuition you can offset as you had cash outflow for tuition. Such as you took summer courses. You will get tax form from university showing amt paid vs scholarship. As well, remember your cadet may still not trigger taxes based on total income. As always do not take tax and accounting advise from a forum and you should consult with a tax professional for advice.

True. She is also using my GI Bill. So, for us we have no offset. Yes, make sure your tax professional knows everything.

 

[ChatterMom2]

True. She is also using my GI Bill. So, for us we have no offset. Yes, make sure your tax professional knows everything.

GI Bill/ VA benefits for tuition/fees are not taxable and that amount should be subtracted from what is shown in box 5 of 1098-T if your school included it.

 

[banjoppd]

Box 1 should be Room and board scholarships that each campus offers 3 and 4 year ROTC scholarship students such as the ID White-Norwich, Service Scholarship-Citadel, and the Patriot-TAMU.

Box 5 should be ROTC scholarship money

 

[WMSMOM]

I know most know this but just a reminder if your kid used their military scholarship for Room or anything that is not tuition and fees you will owe taxes on that amount as income. Some colleges get paid from the military (AF, NV, A, etc.) for the spring term in Dec. That means that money counts for the year it was issued. Where's my crate of tea?

My accountant said that I don't owe anything on scholarships, you may need to double check that

 

[NORWICH89]

Check out the IRS tax law. If you use a scholarship for housing, you have to pay taxes on it as income. If used for tuition and fees you don't.

 

[pa-outdoorsman]

Look, as a practical matter, I believe this issue is largely overblown. The standard deduction for single filers for tax year 2023 is $13,850. That means -- even you are a dependent who is claimed on your parents' return -- you aren't going to owe income tax on any "earnings" up to that amount. And beyond that amount, you are going to be taxed at no more than 12 percent, more likely 10 percent, unless you earned more than $41k.

For example, let's say you are an RTOC scholarship winner who attends a school that provides you with free room and board at a value of $15,000 per year. You can wipe out the majority of that amount with the standard deduction. Then, that leaves you with a very small tax bill. In this example, your taxable income would be $1,150, and you'd owe $11.50 in tax on that.

Even if you have a part-time job and earn say an addition $8,000 on the year, and end up with "taxable income" of $9,150, you're likely looking at a tax liability under $100.

As always, consult your tax advisor for actual advice. I am not a CPA, not do I play one on TV, nor did I stay at the Holiday Inn Express last night. That said, I'll gladly take free room and board for pennies on the dollar in taxes.