Is Scholarship taxable income

Discussion in 'ROTC' started by MSFaygo, Feb 25, 2018.

  1. MSFaygo

    MSFaygo 5-Year Member

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    I just found out DH has been claiming entire AFROTC scholarship plus school reimbursement for remaining tuition and r&b as income for taxes for the last 4 years. I have read many posts thru the years, and I thought only r&b is taxable. The school sends a form 1098-T which reports the entire total - but breaks out what is tuition and what is R&B. Shouldn’t we only be reporting r&b? Any accountants out there with advice? This year taxes are on DS so the question finally came up.
     
  2. Humey

    Humey Member

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    I am a CPA. First of all, 99% of the time, if something is taxable, you will receive some type of form like a W-2 or 1099. The 1099-T is not a form that talks about income of any sort. It is there in order to calculate tuition credits on your tax return. However, when calculating the tuition credit, you must reduce the tuition by any grants or scholarship money. That amount is listed on the 1099-T but i have no idea if the Rotc money is listed there also. Probably is. Since my son gets no scholarship money and i have no clients with who kids receive Rotc money, what i have read on this forum is that if you apply any of the monies to room and board than it is taxable. The money is tax exempt as long as it is used for a qualified education institutional. That doesn't include room and board. On further warning, as most school include both semesters on the current 1099-T, for example, the 2017 1099-T will include both Fall 2017 and Spring 2018, you will find that the final 1099-T will have zero tuition on it as the Spring Semester of senior year would have been included in the 1099-t of the previous year. That isnt an issue except the 1099-t can show zero tuition and and amount for the scholarship. I think that amount would be taxable

    Per IRS Publication 970

    "Tax-Free Scholarships and Fellowship Grants A scholarship or fellowship grant is tax free (excludable from gross income) only if you are a candidate for a degree at an eligible educational institution. You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received. See examples in Coordination with Pell grants and other scholarships in chapter 2 and chapter 3. A scholarship or fellowship grant is tax free only to the extent: It doesn't exceed your qualified education expenses; It isn't designated or earmarked for other purposes (such as room and board), and doesn't require (by its terms) that it can't be used for qualified education expenses; and It doesn't represent payment for teaching, research, or other services required as a condition for receiving the scholarship. For exceptions, see Payment for services, later. Use Worksheet 1-1 to figure the amount of a scholar"
     
  3. MSFaygo

    MSFaygo 5-Year Member

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    I knew I’d get a good answer - didn’t expect it so quick! Thanks, very thorough. I think you cleared it up for me...and anyone one else out there who might have the same question.
     
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