Taxable Grants and Scholarships
If we are asking you to complete a Taxable Grant Review as part of your financial aid application, we are asking you to review your responses to the questions listed below on the FAFSA to confirm the reported amounts. Most students and parents do not have taxable grants and scholarships, so we are asking you to review your responses so your information is accurate. After reviewing your responses, please confirm the amounts listed by sending an email to us at email@example.com. If an amount is incorrectly reported, please make a correction to the FAFSA and notify us by email that a correction was made.
Questions 40d (student) and 88d (parent) on the 2023-2024 FAFSA refer to the portion of the scholarships or grants you or your parent reported to the IRS in your or your parents' adjusted gross income. These scholarships and grants include college institutional grants and scholarships, federal grants, outside scholarships, and state grants. They also include AmeriCorps benefits (awards, living allowances and interest accrual payments) as well as grant and scholarship portions of fellowships and assistantships. Please refer to IRS publication 970 and consult with a tax professional to determine if you have any taxable grants or scholarships.
The portion of a scholarship that is used for paying tuition, fees (not including room and board), books, supplies, and equipment required for course-related instruction, for individuals who are candidates for a degree at a college or university, is excluded from the recipient's federal taxable income. All other scholarship amounts, including amounts used to pay non-qualified expenses such as room and board, are included in the calculation of the recipient's federal taxable income. If the amount of grants and scholarships is more than the eligible costs, the difference is referred to as taxable grants and scholarships. See the Example below:
- $48,500: Total amount Fran received in grants and scholarships for the year ($40,500 from Hampshire College, $5000 from federal sources, $1500 from state sources, and $1500 from a local scholarship foundation).
- - $46,250: Less the total amount of tuition, fees (not including room and board charges), books, and supplies for the year.
- $2,250: This leaves Fran with $2,250 of grants and scholarships for non-qualified expenses, such as room and board.
- The total grants & scholarships is more than the eligible costs; $48,500 - $46,250 = $2,250.
- If Fran is required to file a U.S. individual Income Tax Return (IRS Form 1040), Fran would report $2,250 as taxable income under "wages, salaries, tips, etc." on the tax return. Fran would then enter this amount on her FAFSA under the Taxable Grants and Scholarships question.
You may find specific tax information on the IRS website at www.irs.gov, including IRS Publication 970 (Tax Benefits for Education), IRS Publication 929 (Tax Rules for Children and Dependents), and the Instructions for Form 1040.