Scholarships and Qualified Educational Expenses

My daughter was awarded a small scholarship from a local foundation. The scholarship was paid directly to her and she plans to use the money to pay for books. Am I correct to assume that regardless of whom the scholarship is paid to and regardless of what it is spent on, all scholarship awards must be subtracted from the qualified educational expenses when calculating the expenses eligible for the Hope credit (or any other educational tax credit/deduction)?

Thanks.

Reply to
Steve
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It will be tax free *only* if she is a degree candidate and the books are *required* by the school for all students taking the same course(s).

Am I correct to assume that regardless of

In your situation, that sounds like a true statement. However in general it is only true if the scholarship was tax-free. If the scholarship was included in taxable income, then it could be used as a qualified expense for the credits.

In other words, no double-dipping (two tax benefits for the same expenditure). See IRS Pub 970.

-Mark Bole

Reply to
Mark Bole

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