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
• Travel
• Research
• 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:

• Education
• Training
• Subsistence

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

State taxes

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.