Reporting College Financial Aid
If you apply for financial aid, you might need to provide a copy of your federal return. You’ll use Form 4506 to ask the IRS to send a copy of your return to a third party if you filed:
- Form 1040
- Form 1040A
- Form 1040EZ
If you’re asked only for IRS verification of your income, use Form 4506-T or Form 4506T-EZ.
Types of financial aid
Scholarships — Scholarships include amounts paid for:
- Academic abilities
- Athletic abilities
- Musical abilities
- Other abilities
If you’re a degree candidate, you’ll only pay tax on the part of a scholarship you used to pay for things other than tuition and required fees. Required fees are items required for all students in a particular program.
Scholarship amounts used for these are taxable:
- Room and board
- Clerical help
- Equipment — unless required of all students in the course
Grants — These are treated like scholarships and are tax-free if used to pay for qualifying expenses:
- Pell Grants
- Supplemental Educational Opportunity Grants
- Grants to states for state student incentives
If you use money from these grants for travel to and from school, it’s taxable.
Payments are tax-free for these items received under Department of Veterans Affairs (VA) administered laws:
Fulbright grants — These grants might be awarded for study, research, or teaching abroad. They’re usually treated like any other scholarships in figuring how much of the grant is tax-free.
Reporting financial aid — Don’t report nontaxable scholarship amounts on your return. Include taxable amounts with wages — even if the scholarship amounts aren’t shown on a W-2. To report the aid:
- On Form 1040EZ — Include the taxable amount on Line 1. If the income wasn’t reported on a W-2, print “SCH” and the taxable amount in the space to the left of Line 1.
- On Form 1040 or 1040A — Include the taxable amount on Line 7. If the income wasn’t reported on a W-2, print “SCH” and the taxable amount on the dotted line next to Line 7.
Higher education benefits — The government offers these benefits for those attending a higher-learning institution; you can only claim one of them in a given year:
- American Opportunity Credit — For 2009 to 2017, you can claim this credit for the first four years of college. You must be enrolled in at least half of a full-time load in a degree program.
- Lifetime Learning Credit — You can claim this credit for any number of years. This credit applies to the family as a whole, not on a per-student basis. These aren’t factors for eligibility:
- Number of hours you’re enrolled
- Enrollment in a degree program
Attending school in a state that’s not your home state isn’t considered a permanent address change. If you’re attending college out of state, you’ll still file taxes with your home state.
However, you’ll file a return in both states if either of these applies:
- You earn income in the state where you attend college.
- You’re considered to be a statutory resident of the state where you attend college.
To learn more, see the Education tax tips.
In the past, your IRS debt may have appeared on your credit report if the IRS filed a Notice of Federal Tax Lien against you. Starting in 2018, the three major credit bureaus will remove tax liens from consumer credit reports. However, lenders may still search public records for tax liens.
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