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Taxation of Scholarships, Waivers, and Educational Benefits - sru

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The document serves as a comprehensive guide for the State System of Higher Education regarding the taxation of scholarships, waivers, and educational benefits. It outlines key terms, applicable regulations from the Internal Revenue Code and Pennsylvania Department of Revenue, taxability decision trees for various types of scholarships and waivers, withholding and reporting obligations, and consequences for failure to comply with tax regulations. The guide is intended for internal reference within the State System and includes sample documents to assist in understanding the processes involved.

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Does tax-free scholarships or grants reduce qualified education expenses?

Expenses cannot be paid with tax-free funds You cannot claim a credit for education expenses paid with tax-free funds. You must reduce the amount of expenses paid with tax-free grants, scholarships and fellowships and other tax-free education help.

Is a tuition waiver taxable?

How will the withholding be made? When the value of the tuition waiver exceeds $5,250 in a calendar year, the excess is included as taxable income as non-cash earnings. This means you will not see a pay increase in your check, but rather the excess waiver amount is added to your regular earnings.

Is tuition assistance taxable income?

By law, tax-free benefits under an educational assistance program are limited to $5,250 per employee per year. Normally, assistance provided above that level is taxable as wages.

Are educational scholarships taxable income?

Scholarships that pay for qualified educational expenses at qualified educational institutions generally dont count as taxable income. Scholarships are tax-free only if the student is a degree-seeking candidate, attends a qualified educational institution, and the funds are used for qualified education expenses.

Are tuition grants taxable?

A grant is tax-free only if: You are a candidate for a degree at an eligible educational institution, and. You use the grant to pay qualified educational expenses, and. The grant isnt a payment for time spent researching, testing, teaching, etc.

Do you pay taxes on tuition remission?

Tuition remission you receive at the start of the calendar year falls under the $5,250 exclusion and is not taxable. Once you exceed that amount, every dollar of the graduate remission is taxable.

Where to find amount of college grants and scholarships on tax return?

The amount of Scholarship funds you received is on the Form 1098-T you received from the college or university. The Form 1098-T worksheet will be in the PDF download of your tax return.

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