Tips on giving out Chapter Scholarships

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  • Tips on giving out Chapter Scholarships

    Posted by Anthony Harden on April 1, 2023 at 7:49 pm

    If your chapter is considering doing a chapter scholarship, please DO NOT give the money to the recipient. Give the funds directly to the institution and apply the payment to recipient’s tuition. This small but important act will help avoid potential tax implications for the recipient.

    If you did not know book scholarships, donations to room & board, etc. are all taxable income for the recipient.

    • This discussion was modified 1 year, 1 month ago by  Anthony Harden.
    • This discussion was modified 1 year, 1 month ago by  Anthony Harden.
    g1stgee@aol.com replied 1 year, 1 month ago 2 Members · 1 Reply
  • 1 Reply
  • g1stgee@aol.com

    Member
    April 2, 2023 at 8:29 pm

    Books are a qualified educational expense and may not always be taxable.

    Tax-Free

    If you receive a scholarship, a fellowship grant, or other grant, all or part of the amounts you receive may be tax-free. Scholarships, fellowship grants, and other grants are tax-free if you meet the following conditions:

    • You’re a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
    • The amounts you receive are used to pay for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution.

    I get it is easier to go through school and let them sort it out but in some cases to maximize the American opportunity credit you may want certain scholarships to be counted as taxes for your child in order to maximize the credit (for the parent) which allows them to help with future expenses. This is the case when the child is still being claimed as a dependent. I have seen people increase their credit/return by over $1,000. In some cases your student may get stuck with a $50 -$100 tax bill for claiming $1800 of their scholarship money, but the refund to the parent can more than off set that tax expense and provide additional income to the family.

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