Question

1. Is financial aid for college subject to federal income tax?

2. Can federal and state education grants be taxed as income?

3. Are student loans taxable?

4. When is a scholarship tax exempt?

5. Do you have to be in a degree program to qualify for tax exemption?

6. When can the cost of textbooks be deducted from gross income for tax reporting purposes?

7. Can the amount of a scholarship used for tuition be deducted?

8. Can living expenses while on scholarship be deducted?

9. Is the income and stipend from a teaching fellowship or research assistant ship tax exempt?

10. Are the tuition, books, and stipends of ROTC students tax exempt?

Answer 1

1. generally, financial aid covering tuition and fees are tax-free. Money covering room and board is subject to taxes. therefore depnding upon the law since question does not provide what type of financial aid is given it can not be said whether it subject to federal income tax or not .if financial aid given is for tutuion and fees than its tax free if it is given for room and board it is subject to tax.

2. Tax-free grants

   A grant not need to be reported on your tax return, if you satisfy two requirements that apply to all scholarships and grants:

• You must be enrolled in a program as a degree candidate,

• you must be pursuing a training program that prepares you for specific types of employment upon completion and you  must use the grant only to pay for “qualified education expenses.

• ”Qualified education expenses are portion of your grant that is not spent on qualified education expenses is required to be reported as income tax. Qualified education expenses include tuition and fee payments, and the books, supplies, and equipment required for your courses.For example, if you are asked by your professor to sumbit a specific project so submission cost on that specific project is tax free

• If you use your grant to pay for room and board charges, or to travel to your permanent home on weekends or holidays, then the amount will be considered taxable income.

3 - Private and federal student loans won't be considered taxable income because repayment of  the money is required at some point of time.

restriction in order to claim tax free loan are You have to be a degree-seeking student at an eligible institution and use your awards for tuition and fees to avoid paying taxes on them.

If a scholarship covers more than tuition and fees, you will have to pay taxes on those expenses. If youtextbooks have a $15,000 scholarship and pay $12,000 in tuition and fees, you will have to pay income tax on the $3,000 difference.

4-A scholarship is tax-free if: You are a full-time or part-time candidate of a degree at a primary, secondary or accredited post-secondary institution. The money recieved as scholarship covers tuition and fees to enroll in or attend an educational institution required for your course.

5- yes, you have to be in degree program in order to claim tax exemption.

6- if you are a degree candidate and the award is used to pay for tuition and required fees, books, supplies and equipment. then cost of textbooks can be used as deduction.

7-yes ,amount of a scholarship used for tuition be deducted as per the explation given in answer 1

8-If your scholarship covered both tuition and board, the amount you use for tuition is tax-free. However, the amount you used for room and board is taxable. so living exepenses are not exempt hence fully taxable.

9-he scholarship or fellowship isnot taxable if

True fellows receive scholarship or fellowship payments (stipends) intended to assist them in pursuing a course of study or research. True fellows have the following characteristics:

• must be candidates for a degree.
• must have major professors who can appropriately mentor the proposed research and provide an environment conducive to carrying out this research.
• generally are free to explore new areas, depending on the progress of the research.
• are not considered graduate staff of the University. Payment is provided in the form of a stipend provided to support the fellow. Stipends are not considered compensation for services.

10- yes they are tax exempt  ROTC scholarships and the service academies are specifically exempted from this requirement in the tax, even though they could be considered payment for services. So the tuition, books, and the monthly stipend students receive from ROTC are exempt from tax