Teens & Taxes: Are My Teenager’s Scholarships and Grants Taxable?

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If your teen received any scholarship money or grants to attend a college or university, you might be wondering if that income is taxable. As with so many things related to teenagers and taxes, the answer is: maybe.

See: Teens & Taxes: How Can I Be Sure My Teenager Won’t Be Accidentally Taxed on P2P Transactions?
Find: Teens & Taxes: What Tax Form Should My Teenager File?

First, it’s important to understand that not all scholarship funds and grants are taxable, regardless of your teen’s income. Any scholarship and grant money used for tuition, fees, books, supplies, and equipment for courses required at the educational institution your teen is attending is not taxable and does not count toward your teen’s gross income.

However, if your teen receives additional scholarship or grant money that helps cover room and board, travel, incidental expenses, and any optional equipment used for study — these funds might be taxable. That money may apply toward your teen’s gross income.

However, if those additional funds on their own — or combined with any other earned income your teen received — do not total $12,550 or more in gross income, your teen will not have to pay taxes on the money and may not have to file taxes. Your teenager might choose to file, however, if they worked a W-2 job and believe they might have overpaid their withholding taxes in 2021 (perhaps being owed a tax refund).  

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If your teen’s income — including any W-2, 1099-NEC, and scholarship and grant money — exceeds the standard deduction of $12,550 for the 2021 tax year, they will have to file taxes.

Learn: Teens & Taxes: Can I Declare My Teenager as a Dependent If They Have a Gig Job?
Explore: Teens & Taxes: How Does Declaring Your Employed Teenager as a Dependent Affect Their Taxes?

How to Report Scholarship and Grant Income on Tax Returns

The institute or organization that issued the scholarship should send your teen a W-2 form showing the taxable portion of the scholarship. Your teen should report those funds on their tax returns using Form 1040 on the “Wages, salaries, and tips” line. If your teen didn’t receive a W-2, they should check with the issuing organization regarding the taxable or non-taxable nature of the funds. If the money is taxable based on IRS regulations, your teen can enter the amount in the space to the left of the “Wages, salaries, and tips” line, using the designation “SCH.”

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About the Author

Dawn Allcot is a full-time freelance writer and content marketing specialist who geeks out about finance, e-commerce, technology, and real estate. Her lengthy list of publishing credits include Bankrate, Lending Tree, and Chase Bank. She is the founder and owner of GeekTravelGuide.net, a travel, technology, and entertainment website. She lives on Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten, and three lizards of varying sizes and personalities – plus her two kids and husband. Find her on Twitter, @DawnAllcot.
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