Reporting school merit scholarships as income on FAFSA - do I put zero?
I'm filling out the 2025-26 FAFSA for my youngest (third kid through college) and I'm stuck on this question: "Amount of College Grants, Scholarships, or AmeriCorps Benefits Reported as Income to the IRS". My son gets about $26k annually in merit scholarships from his university, but I've never included this as income on our tax returns. Should I just put zero here? Or am I supposed to be reporting these merit scholarships somewhere on our taxes that I've been missing all these years?? Getting worried I've been doing this wrong for all my kids now! For context, we're in that fun income bracket where we never qualify for need-based aid, but need to complete FAFSA for my son to keep his merit scholarship.
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Chloe Martin
You're fine putting zero! Merit scholarships only need to be reported as income to the IRS if they exceed the cost of tuition, fees, books, and required supplies. If the scholarship money was used for qualified educational expenses, it's not taxable income and wouldn't be reported on your tax return. Since your son's $26k merit award likely went directly to tuition and other qualified expenses, you would enter zero for that question.
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Omar Farouk
•Oh thank goodness! I was having a mini panic attack thinking I'd messed up our taxes for years. So as long as his scholarship went toward tuition and fees (which it definitely did - barely covers half his total costs), I'm correct in putting zero? That's such a relief.
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Diego Fernández
the way i understood it, scholarships only count as income if they pay for room/board/living expenses. if they just go toward tuition you dont report them. at least thats what i did for my fafsa last year and never had any issues
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Chloe Martin
•That's exactly right. Scholarship funds used for qualified educational expenses (tuition, fees, books, required course materials) aren't taxable. Only scholarship money used for non-qualified expenses like room and board, travel, or optional equipment would be considered taxable income that should be reported to the IRS.
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Anastasia Kuznetsov
Wait I'm confused now. Do we have to manually report scholarships somewhere on taxes? My daughter got a full ride last year and we just didn't mention it anywhere on our taxes. Was that wrong??
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Sean Fitzgerald
•No, you don't need to manually report anything unless the scholarship exceeded qualified educational expenses. If your daughter's scholarship covered tuition, fees, books, and required supplies, but nothing else, there's nothing to report. The school should have provided a 1098-T form showing the amount billed and scholarships received. The only time you'd need to manually report is if the scholarship funds were used for room and board or other non-qualified expenses - then only that portion becomes taxable income. It sounds like you handled it correctly.
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Zara Khan
I've completed FAFSAs for 3 kids over 7 years now, and that question always confused me too. The key thing to understand is they're asking specifically about amounts that were REPORTED AS INCOME on your tax return. If you didn't include any scholarship money as income on your 1040, then the answer is zero. Just to be clear: scholarships that exceed qualified educational expenses (tuition, fees, books, supplies) should be reported as income. So if your son's $26k merit scholarship was more than his qualified expenses, the excess should have been reported on your taxes. But if all of it went to qualified expenses or was less than those expenses, then zero is correct for that FAFSA question.
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Omar Farouk
•Thanks for this explanation! His $26k definitely doesn't cover all his qualified expenses - tuition alone at his school is about $38k, so we're still paying out of pocket beyond the scholarship. Sounds like I'm good with entering zero then.
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MoonlightSonata
The way the financial aid system works is completely BROKEN. They ask these confusing questions deliberately so people make mistakes! Then they can deny aid or worse - come after you later for "errors." I've had THREE different financial aid counselors give me THREE different answers about scholarship reporting. The whole system is designed to confuse middle class families while the wealthy hire consultants and the poor get automatic aid. FAFSA is a JOKE.
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Diego Fernández
•ikr?? the new FAFSA is supposed to be "simplified" but they still have all these weird questions that nobody understands. i spent like 5 hours trying to figure out all this stuff last year
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Mateo Gonzalez
When I was trying to figure this out last month, I tried calling Federal Student Aid but kept getting the runaround - wait times over 2 hours! I eventually used this service called Claimyr (claimyr.com) that got me connected to an actual FSA agent in about 20 minutes. They have this video showing how it works: https://youtu.be/TbC8dZQWYNQ - it definitely saved me from the endless hold music! The agent confirmed that you only enter amounts that were actually reported as taxable income on your return.
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Omar Farouk
•That's good to know! I'll bookmark that service in case I run into any other issues. The FAFSA seems to get more complicated every year despite claims they're simplifying it.
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Sean Fitzgerald
Financial aid counselor here - I can confirm what others have said. For the FAFSA question about "Amount of College Grants, Scholarships, or AmeriCorps Benefits Reported as Income to the IRS," you should only enter amounts that appeared as income on your federal tax return. For scholarships and grants: - Amounts used for qualified educational expenses (tuition, fees, books, required equipment): NOT taxable, NOT reported on tax return, enter ZERO on FAFSA - Amounts used for non-qualified expenses (room, board, optional equipment): Taxable, should have been reported on tax return, enter that amount on FAFSA If you didn't report any scholarship amounts as income on your tax return, then the answer to this FAFSA question is zero.
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Zara Khan
•Thank you for the clear explanation! It always helps to hear from a professional. I wish the FAFSA instructions were this straightforward.
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Anastasia Kuznetsov
My son got a bunch of outside scholarships that went to his account and then the school sent him a refund check for the excess. Does that part count as income? The refund was like $3,500.
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Chloe Martin
•Yes, that refund portion might be taxable! If the $3,500 was excess scholarship money beyond what was needed for qualified educational expenses (tuition, fees, books, required supplies), and he used it for things like housing, food, or other personal expenses, then that $3,500 should have been reported as income on your tax return. If you did report it, then you would enter that amount for the FAFSA question. If you didn't report it (and should have), you might want to consult with a tax professional about amending your return.
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Nia Williams
Just wanna say that having three kids in college...respect! That's a huge financial undertaking even with merit scholarships. Hope your youngest does great!
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Omar Farouk
•Thank you! It's definitely been a journey (and expensive!). Fortunately this is our last one, so we can see the light at the end of the tunnel, haha!
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CosmicCrusader
This is such a helpful thread! I'm in a similar situation with my daughter who has a partial merit scholarship. Reading through all these responses really clarifies the distinction between scholarships used for qualified vs. non-qualified expenses. It sounds like most of us are overthinking this question - if the scholarship money went toward tuition and fees and we didn't report any of it as income on our tax returns, then zero is the correct answer. Thanks everyone for sharing your experiences, especially the financial aid counselor's breakdown!
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Giovanni Colombo
•Absolutely agree! This thread has been incredibly helpful for understanding this confusing FAFSA question. As someone new to the financial aid process, I was also worried about making mistakes with scholarship reporting. It's reassuring to see that so many families have similar questions and that the answer really comes down to whether the scholarship amounts were actually reported as income on tax returns. The financial aid counselor's explanation was especially clear about the qualified vs. non-qualified expense distinction. Thanks to everyone for sharing their knowledge!
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