Tuition $20000. Room & Board $5000.
scholarship and grants $21000. Student paid cash $4000.
Not sure of the pecking order of payments applied to tuition and fees versus room and board. Will the $4000 paid by student count toward tuition and thus be eligible for credits if all other requirements met?
Thank you
Only the part of the scholarship used for tuition plus books, equipment, fees is tax-free.
BEGIN QUOTE tax topic 421
Qualified scholarship and fellowship grants are treated as tax-free amounts if the following conditions are met:
You are a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and Amounts you receive as a scholarship or fellowship grant are used for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution.
You must include in gross income amounts used for incidental expenses, such as room and board, travel, and optional equipment, and generally amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant. Also you must include in income any part of the scholarship or fellowship that represents payments for services.
END QUOTE
So 1k of the scholarship should be included in the wages line of 1040. As none of this money is used for tuition and fees, it does not qualify for any of the 3 educational credits (American opportunity, Lifetime, Hope, tuition and fees deduction). See for example
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