Do I have to report college grant refunds as taxable income on my 2025 return?

The answer actually depends on how you used the money. Scholarship/grant money used for qualified educational expenses (tuition, fees, books, supplies required for courses) is generally tax-free. But any portion used for non-qualified expenses like room and board, groceries, or rent is considered taxable income. Since you mentioned you used the $1750 refund for rent and groceries, you would need to report that amount as taxable income on your tax return. The school won't report how you spent the money - they just report the total scholarship amount on your 1098-T. It's your responsibility to determine what portion went to qualified vs. non-qualified expenses. When you file, you'll include the taxable portion as "Scholarships and fellowships" on your tax return, even though you may not receive a separate W-2 for it.

Just went through this exact same situation last year! After hours of researching and stressing, I found this amazing tool called taxr.ai (https://taxr.ai) that saved me so much hassle. I uploaded my 1098-T and my scholarship documents, and it automatically analyzed everything and told me exactly how much of my grant refund was taxable. It even explained the rules about qualified vs non-qualified expenses in super easy terms. The coolest part was it asked me questions about how I used the refund money and then calculated the taxable portion based on my answers. Way better than the confusing explanations I was finding online.

Just wanted to update everyone - I tried taxr.ai that was mentioned earlier and I'm actually impressed. I was totally confused about which parts of my scholarships were taxable since I had multiple sources. The tool broke it down clearly and showed me that only about $1200 of my refund was actually taxable because I spent the rest on required textbooks and a laptop that my program requires. It literally saved me from overpaying by almost $800! The explanations were really clear about what counts as qualified expenses vs. non-qualified. Way less stressful than trying to decipher IRS publications. Definitely recommend for anyone dealing with scholarship/grant refunds.

If you're still confused after looking into this scholarship issue, you might need to talk directly to the IRS. I was in the same boat last year and spent DAYS trying to get through to someone at the IRS for clarification. Busy signals, disconnects, hours on hold... it was a nightmare. Then I found Claimyr (https://claimyr.com) which totally changed the game. They got me connected to an actual IRS agent in about 15 minutes when I had been trying for days on my own. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I talked to walked me through exactly how to report my excess scholarship funds and confirmed I was doing it right. Apparently there are some exceptions I didn't even know about that applied to my situation!

I need to eat my words from my earlier comment. After my last failed attempt to reach the IRS (3.5 hours on hold before getting disconnected), I got desperate and tried Claimyr. I'm genuinely shocked - I was connected to an IRS agent in 17 minutes. The agent clarified that for my situation with excess scholarship funds, I only needed to report as income the amount that exceeded qualified educational expenses - NOT the entire refund amount. This saved me about $1200 in taxes I would have overpaid! The agent even emailed me the specific IRS publication sections that applied to my case. I've been filing taxes for 6 years and this was the first time I ever actually spoke to a human at the IRS. Worth every penny just for the peace of mind.

You also need to check if your grant is even taxable in the first place. Some grants like Pell Grants are generally not taxable as long as you're pursuing a degree and use the money for qualified education expenses. But other grants might have different rules. I found out the hard way last year that my university excellence grant was partially taxable because it exceeded my tuition and I used some for housing. Had to file an amended return and pay extra.

Am I the only one who thinks it's ridiculous that student aid can be taxable at all??? The government gives us grants because we need financial help for college, then turns around and taxes us on that same money? Make it make sense. 🙄

I completely understand your frustration - dealing with scholarship taxation can be really stressful! From what I've learned through my own experience and research, the key is tracking exactly how you used the refund money. Since you mentioned using the $1750 for rent and groceries, that portion would likely be considered taxable income. However, if you also purchased any required textbooks, lab supplies, or other course materials with scholarship money during the same academic year, you might be able to reduce the taxable amount. My advice would be to gather all your receipts and records from that semester - tuition bills, book purchases, required supplies, etc. Calculate your total qualified educational expenses and compare that to your total scholarship/grant amount. Only the excess beyond qualified expenses needs to be reported as income. Also, don't stress too much about perfect precision if you can't find every receipt. The IRS expects reasonable estimates based on your best recollection. Just be honest and consistent in how you calculate it. You've got this!