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Previous semester as an undergraduate student, I won a pretty big scholarship from my university. So, along with the Pell Grant and other state grants/scholarships, that amount was also applied to my tuition and book fees this semester, and the rest was reimbursed to me.

As far as I know, and correct me if I'm wrong, any scholarship or grant money that is not used for educational costs (books, tuition, equipment, etc.) is taxable. Now, I was reimbursed a total of $3k for this semester. Some of that money will go towards transportation and food, and some money will be leftover. Though the total amount of money I receive is still less than the COA, the $3k I was reimbursed will go towards non-educational costs.

So would my $3k be considered taxable income? If so, would the income be considered earned or unearned when it comes to determining whether I need to file a tax return? If its considered earned, than I might not need to report it based on current limits. Also, I am filed as a dependent. Does that change anything?

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Yes, it's taxable. Confirm it with this IRS free tool.

See if you can apply more of the money to qualified, required educational expenses. If you can reduce the $3k in unearned income to $2100, there will be no need to fill out Form 8615 (the kiddie tax).

You may be able to claim an educational tax credit, in any case.

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  • Thanks for the answer. I do have two questions though. In the article you have linked, it talks about how the gross unearned income is reduced by the dependent's standard deduction. It provides an example with a student using $18k for non-education purposes and $12,200 is subtracted from it to only yield $5800 taxable income. What is that deduction for? Also, would I be able to get education tax credits if I don't file a tax return?
    – ARJ
    Aug 26 at 4:56
  • There's another IRS free tool for "do I have to file?": irs.gov/help/ita/do-i-need-to-file-a-tax-return If the answer is 'yes', then using tax software should help you figure out how the deductions work, after you enter "Yes, I can be claimed as a dependent" in the tax software. Aug 26 at 20:39
  • Okay, so when I use that IRS tool, I list the $3k as unearned income right?
    – ARJ
    Aug 26 at 23:23
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    Yes, that is right. Aug 27 at 0:35

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