Student Taxes

Won a scholarship or fellowship?

All or part of a scholarship or fellowship may be taxable, even if you did not receive Form W-2.

A scholarship is an amount paid for the benefit of student at an educational institution in a graduate or undergraduate program.

A fellowship grant is an amount paid for the benefit of an individual to aid in the pursuit of study or research.

What is excluded:

1.       Tuition and fees required for enrollment or attendance.

2.       Fees, books, supplies and equipment required for the courses.

What is taxable:

Any part of the grant used for other purposes, like room and board.

Payment for services: Sometimes there are conditions to provide a service, in return of a grant. All payments that are received for past, present or future such services are taxable. It also includes Fulbright students and researchers.

For more information on Taxable Scholarships and Fellowships visit
http://www.irs.gov/pub/irs-pdf/p970.pdf

Student Loan Interest Deduction:

This deduction can be claimed in addition to itemized deductions. Student loan interest on loans issued for self or spouse (if filed jointly) and for any dependants can be deducted from taxable income. The maximum amount of tax deduction that can be claimed is limited to $2500.

·         For income ranges between $60,000 and $75,000, the deduction for student loan interest will be prorated. ($120,000 to $150,000 for married people filing jointly)

·         For incomes > $75,000 (> $75,000 for married filing jointly) the student loan interest is not deductible at all.

Phase outs for Student loan interest deductions:

Starting with the year 2013, the deduction will revert to an older law in which student loan interest will be deductible only for the first 60 months of repayment.

How to claim the deduction:

No special forms are needed to claim the student loan interest deduction. The deductible amount is simply written on Line 33 of Form 1040, or line 18 of Form 1040A, and subtracted from the income.

Which Student Loans Qualify:

The loan must be taken to pay qualified higher education expenses which include cost of tuition, fees, room and board, books, equipment, and other necessary expenses such as transportation in any accredited post-secondary institution, including those conducting internship or residency programs in health care facilities.

These costs must be reduced by any employer-provided educational benefits received  by the student, any non taxable distributions from a Coverdell ESA, any savings bond interest that was non taxable because it was used for education expenses, any non taxable scholarships or veteran’s education benefits.

Refer IRS publication 970 for more information.