Confused about reporting taxable scholarships as income on FAFSA - 1098-T form enough?

This is actually an important distinction many people miss. Scholarships CAN be taxable income if they exceed qualified educational expenses. The 1098-T shows the total scholarships/grants received, but it doesn't tell you how much was taxable. Here's how it works: - Scholarship money used for tuition, fees, books, and required supplies is NOT taxable - Scholarship money used for room, board, travel, or other expenses IS taxable If all $14,500 went directly to tuition and required fees, then likely none of it was taxable. Check your 2023 tax return - if you reported scholarship income, it would appear on Schedule 1 as "SCH" income.

OMG i had same problem!!!! i got SO confused about this too last month!! my son got scholarships and i was like what am i supposed to do with this?? the school never explained this part to us

As the previous commenter explained, only scholarships that exceed qualified educational expenses are taxable. The way to determine this is: 1. Add up ALL qualified educational expenses (tuition, required fees, books required for courses) 2. Subtract the total scholarship/grant amount 3. If the result is positive, no scholarship was taxable 4. If the result is negative, that negative amount was taxable income For example: - $26,000 in qualified expenses - $14,500 in scholarships - Result: $11,500 (positive, so no taxable scholarship) But if it were: - $12,000 in qualified expenses - $14,500 in scholarships - Result: -$2,500 (negative, so $2,500 of scholarship is taxable) If you didn't report any scholarship income on your taxes and all scholarships went to qualified expenses, enter $0 on the FAFSA.

The 1098-T can be confusing because it doesn't directly tell you the taxable portion. I had this same issue last year and spent hours on the phone trying to get through to the FAFSA helpline for clarification. I finally used Claimyr (claimyr.com) to get through to an actual agent in minutes instead of waiting for hours. They have a video demo showing how it works: https://youtu.be/TbC8dZQWYNQ The agent confirmed that if you didn't report any scholarship as income on your tax return, you should enter $0 on this FAFSA question. They also explained that for room and board scholarships, you would need to report those as taxable.

this whole FAFSA thing is ridiculous!! they make it SO COMPLICATED on purpose i swear. why cant they just EXPLAIN what they want better? my daughters scholarship was all for tuition and we didnt report anything as income and got audited last year BECUZ OF IT. now im paranoid about putting the wrong thing on every form!!!!

Update: I went ahead and put $0 for the taxable scholarship question since we didn't report any scholarship income on our taxes. Thanks everyone for your help! This forum saved me so much stress and confusion.

My son just started college and I'm already dreading next year's FAFSA. Can someone tell me WHERE on the FAFSA this question appears? I want to make sure I'm prepared when we get there.

When my daughter was in school back in 2019, we actually HAD to report some scholarship as taxable income because she got a full-ride that covered more than tuition. Her housing stipend counted as taxable income. Let me tell ya, nobody explained this to us! Found out the hard way when our tax preparer caught it. So if your kid's scholarship pays for anything beyond direct educational expenses, watch out!

This thread has been so helpful! I'm dealing with this exact same situation right now. My daughter received a merit scholarship last year, and I've been staring at this FAFSA question for days trying to figure out what to put. Like others mentioned, the 1098-T form really doesn't make it clear at all. I wish schools would provide better guidance on these tax implications when they award scholarships. It sounds like since all of her scholarship went toward tuition and we didn't report any as income on our tax return, I should also enter $0. Thanks everyone for sharing your experiences - it's reassuring to know I'm not the only parent confused by this!

I'm so glad I found this thread! I'm a first-time FAFSA filer and this scholarship tax question had me completely stumped too. My son received about $8,000 in merit scholarships last year, and like many of you, I had no idea some scholarships could be taxable. After reading through all these helpful explanations, I now understand that since his entire scholarship amount went toward tuition (which was much higher than the scholarship), none of it was taxable income. We didn't report any scholarship money on our tax return either, so I'll be entering $0 for this question. Thank you all for breaking this down so clearly - the FAFSA really should provide better explanations for these confusing questions!

I'm another parent dealing with this exact same confusion! My daughter received several small scholarships totaling about $6,000 last year, and when I got to this FAFSA question I literally had to stop and research for hours. The wording is so unclear - "taxable scholarship or grant aid reported to the IRS as income" made me panic thinking I had missed something important on our taxes. After reading everyone's explanations here, I feel much more confident. Her scholarships all went toward tuition and fees (which were way more than $6,000), and we didn't report any scholarship income on our tax return, so I'm going with $0. It's honestly ridiculous how many parents are struggling with this same question - the FAFSA really needs clearer instructions or examples for these situations!

This whole scholarship tax situation is such a mess! I'm dealing with this for the first time too and honestly had no clue scholarships could even be taxable. My daughter received about $9,200 in various scholarships last year and when I saw this FAFSA question I immediately started second-guessing everything. Did we file our taxes wrong? Should we have reported something? After reading through all these responses though, I'm feeling way more confident. Her scholarships all went straight to tuition and required fees (which were around $22,000), and we definitely didn't report any scholarship money as income on our tax return. So like everyone else here, I'll be putting $0. It's honestly wild how many parents are getting tripped up by this exact same question - you'd think the FAFSA would provide clearer guidance or at least some examples! Thank you all for sharing your experiences, it's such a relief to know I'm not alone in this confusion.

I'm another parent going through this exact same confusion! My daughter received about $12,000 in scholarships last year and when I hit this FAFSA question I completely froze. The wording is so confusing - I had no idea scholarships could even be considered taxable income! After reading through everyone's helpful explanations here, I now understand that since all of her scholarship money went toward tuition and fees (which totaled around $31,000), none of it was taxable. We didn't report any scholarship income on our tax return either, so I'll be entering $0. It's really frustrating how the FAFSA doesn't provide clearer guidance on this - so many of us parents are struggling with the exact same question! Thank you all for sharing your experiences and breaking this down so clearly. This community has been a lifesaver for navigating these confusing parts of the FAFSA process!

I'm another parent dealing with this exact same situation! My daughter received about $8,500 in scholarships last year and I've been staring at this FAFSA question for over an hour trying to figure out what to put. Like everyone else here, I had absolutely no idea that scholarships could potentially be taxable income - nobody ever explained this to us when she received them! After reading through all these incredibly helpful explanations, I now understand that since her entire scholarship amount went toward tuition and required fees (which were around $19,000), none of it was taxable. We definitely didn't report any scholarship money as income on our tax return either, so I'll be entering $0. It's honestly mind-boggling how many parents are getting stumped by this exact same question - you'd think the FAFSA would provide clearer instructions or at least some examples! This thread has been such a lifesaver, thank you all for sharing your experiences and making this confusing process feel less overwhelming.