Scholarship taxable?

[jklcpa]

New client is single mom claiming 2 children.  Older child is 19 years and a full time student with taxable scholarship income that will be subject to the kiddie tax.

This child's 1098T reported totals of 15K in tuition and 29K in scholarships, with the excess created because of the timing of when the tuition and scholarships were reported on the 1098Ts.   Scholarship is Temple U's President's Scholarship award that appears to fully covers tuition and is automatically awarded to qualifying students.

The problem is that the 1098T tuition amount is for fall 2017 tuition and fees only while the scholarship appears to be for spring and fall 2017, and that is creating the excess scholarship of $14K.

The details don't make sense to me when I see this:

• Trans date 1-17-17  tuition $1296,   scholarship (same date) $14484
• Trans date 8-28-17 tuition & fees $14,282,  scholarship same date $15264

Is there any reconciling process that would allow the scholarship awarded for the spring 2017 semester to be considered nontaxable?  I don't have the 2016 1098T to know if Temple included the spring '17 tuition on that form, or would that even matter?

[ILLMAS]

I would say taxable if the student recieved a refund, no if its to be used for next school year.  

[jklcpa]

I would agree if the parent or student had actually paid tuition, but what doesn't make sense is that this scholarship was automatic based on GPA and SAT scores and fully covered tuition, so I'm assuming that the enrollment and scholarship award would be somewhat simultaneous with the scholarship being applied at the time tuition was charged.   How would the student receive a refund if no tuition was ever paid?

[Lee B]

Almost all of the detailed reports that I see, bill the next term's tuition at the end of the previous term.

Then they  post the payments ( Scholarships, loans etc ) when the term actually begins.

So you have a timing problem, where you can't see the whole picture unless you can look at the detailed reports showing prior year, current year, & next year.

It's a real mess and I suspect what is actually reported on most tax returns is usually not completely accurate.

[jklcpa]

30 minutes ago, cbslee said:

Almost all of the detailed reports that I see, bill the next term's tuition at the end of the previous term.

Then they  post the payments ( Scholarships, loans etc ) when the term actually begins.

So you have a timing problem, where you can't see the whole picture unless you can look at the detailed reports showing prior year, current year, & next year.

It's a real mess and I suspect what is actually reported on most tax returns is usually not completely accurate.

That makes sense to me and I suspect that all of the spring 2017 tuition was billed and included on the 2016 1098T.  No education credits were claimed in 2016; mom's a doctor with income that well exceeded the limit anyway.

I guess this wouldn't be a problem if the spring 2018 was included on the 2017 1098T, but the kid moved to Australia this year for school.  Now I will need to find out if the school this young woman is attending is one that is one the list of int'l schools that participate in our federal student aid program and how much tuition she paid, if any, before the end of 2017, right?   I hope there isn't some sort of scholarship that is taxable there for 2017 too.

Is there any reconciling or matching of the tuition and scholarship that would allow this (timing) difference to not be taxable?

Edited April 17, 2018 by jklcpa
typo-changed your to our

[Lynn EA USTCP in Louisiana]

Don't forget to inquire of foreign accounts for possible FBAR filing for 2018.