ROTC Stipend & Taxes

unkown1961

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I thought this had been addressed, but can't find a thread - are ROTC stipends taxed and are taxes withheld? Thanks.
 

AROTC-dad

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  • Stipend (subsistence allowance) and book money is not taxed.
  • ROTC scholarship money that is applied toward tuition and fees is not taxed.
  • ROTC scholarship money that is applied toward room and board IS taxed
  • Pay for Summer Training (e.g Basic camp, Air Assault, CULP) IS taxed
Here is a good thread from the forum:
https://www.serviceacademyforums.com/index.php?threads/arotc-scholarship-and-taxes.46684/

Here is the IRS source:
Stipend: https://www.irs.gov/uac/special-tax-benefits-for-armed-forces-personnel
Scholarship: https://www.irs.gov/publications/p970/ch01.html
 
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unkown1961

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Thanks bfrat93 and AROTC-dad. I was wondering because my daughter is being asked to fill out a W4 in her papers (she'll be a freshman Type 1 AFROTC). We're trying to figure out withholdings.
 

AROTC-dad

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The only withholding should be for scholarship monies put toward room and board. If it is all applied toward tuition, books, and fees, then you should have zero withholdings.
 

AROTC-dad

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Also, any taxes owed for scholarships applied toward room and board MIGHT be offset by either of these tax credits: You can only use one, NOT BOTH.
  1. American Opportunity Tax Credit (available through 2017) allows up to $2,500 per student for four years of undergrad education BUT your modified adjusted gross income must not exceed $80K single or $160K Married filing jointly.
  2. The Lifetime Learning Credit - Allows up to $2,000 per year per tax return (not per student) for Undergrad or graduate degrees. However income restrictions are tougher. MAGI must be $55K or less for individual and $110K or less for married filing jointly.
For more info:
https://www.irs.gov/individuals/aotc
https://www.irs.gov/publications/p970/ch03.html

Disclosure: Not legal advice. I am a Certified Financial Planner(tm) but not a licensed tax preparer or attorney. See your licensed tax professional for specific advice.
 

Humey

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Here's a link to an old tax related thread:

https://www.serviceacademyforums.com/index.php?threads/rotc-and-taxes.19341/

Essentially stipends, both substances and book allowances are tax exempt. As a cadet/midshipman, you will be taxed for pay from summer training (AF Field Training, Marine OCS, CULP, CLC, etc.).
They haven paid anyone going to AF Field Training in years. I think you have to be there for 30/31 days, dont quote me on this, but as the kids spend less than 20 days now, they dont get paid.
 

roguemom35

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Also, any taxes owed for scholarships applied toward room and board MIGHT be offset by either of these tax credits: You can only use one, NOT BOTH.
  1. American Opportunity Tax Credit (available through 2017) allows up to $2,500 per student for four years of undergrad education BUT your modified adjusted gross income must not exceed $80K single or $160K Married filing jointly.
  2. The Lifetime Learning Credit - Allows up to $2,000 per year per tax return (not per student) for Undergrad or graduate degrees. However income restrictions are tougher. MAGI must be $55K or less for individual and $110K or less for married filing jointly.
For more info:
https://www.irs.gov/individuals/aotc
https://www.irs.gov/publications/p970/ch03.html

Disclosure: Not legal advice. I am a Certified Financial Planner(tm) but not a licensed tax preparer or attorney. See your licensed tax professional for specific advice.

Yeah, sorry AROTC-dad, room and board expenses are not qualified expenses for the American Opportunity Credit or Lifetime Learning Credit. I am a CPA who prepares personal taxes.
 

roguemom35

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AROTC-dad

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Yeah, sorry AROTC-dad, room and board expenses are not qualified expenses for the American Opportunity Credit or Lifetime Learning Credit. I am a CPA who prepares personal taxes.

Thanks for the clarification.
 

Momof3kids

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Yeah, sorry AROTC-dad, room and board expenses are not qualified expenses for the American Opportunity Credit or Lifetime Learning Credit. I am a CPA who prepares personal taxes.

Hopefully you’re still on here and can answer this question. :) if scholarship money goes to tuition, but the school gives ROTC a $4k discount on room and board, do we have to claim the $4k as income?
 

Humey

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Yeah, sorry AROTC-dad, room and board expenses are not qualified expenses for the American Opportunity Credit or Lifetime Learning Credit. I am a CPA who prepares personal taxes.

Hopefully you’re still on here and can answer this question. :) if scholarship money goes to tuition, but the school gives ROTC a $4k discount on room and board, do we have to claim the $4k as income?
Shouldnt be. If they normally charge 10K per year and decide to only charge you only 7K, then it is only a discount. If they give you 3K for tuition and you use it on room and board, then it is income
 

Momof3kids

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Shouldnt be. If they normally charge 10K per year and decide to only charge you only 7K, then it is only a discount. If they give you 3K for tuition and you use it on room and board, then it is income

Thank you!
 
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