| Paying for college is just about the hardest thing most | | | | that you ordered on a random Thursday; but if you |
| of us will ever do. The cost of tuition just keeps | | | | use scholarship money to pay for it then you really do |
| climbing year and year out, usually faster than the | | | | have to keep track precisely. |
| normal rate of inflation! The best way to finance | | | | Another common trap that most people don't even |
| college is to get it paid for with a scholarship. Luckily | | | | think about has to do with employment. If part of your |
| scholarships are becoming more and more common, | | | | scholarship or financial aid package depends on you |
| and more and more available for students; even | | | | working on campus, say in the library or in the |
| students with less than stellar track records in the | | | | cafeteria, then the IRS may consider part of your |
| grades apartment. | | | | scholarship as taxable income and not a scholarship. |
| But there is one or two major traps when it comes to | | | | So if you have a $20,000 scholarship, and $5000 of |
| winning a scholarship... these traps come from the | | | | that scholarship comes from a work study program of |
| Internal Revenue Service! Most people don't realize | | | | some sort; then that $5000 may be taxable income. |
| that scholarships can be taxable. Now it's true, the | | | | Again, the rule of the day is to keep scrupulous |
| most scholarships are tax free, but they are only | | | | records. Your financial aid package should spell out |
| tax-free if they are used only for tuition, as well as | | | | how much of your aid is derived from work study |
| books, course materials, supplies, and things like this | | | | programs, and how much of it is derived from general |
| that are directly related to your education needs. | | | | grants and things of this nature. But be sure to keep |
| If you use part of your scholarship to pay for your | | | | track on your own as well. Keep any pay stubs that |
| room and board, then that amount becomes taxable | | | | you may receive, and any other records that you can |
| and you have fallen into the tax trap! Personal | | | | use to show exactly how much money you received |
| expenses also fall under the tax trap. Basically any | | | | from work study and how much you received from |
| item that you use your scholarship money to pay for | | | | other sources. |
| that isn't directly related to your college expenses | | | | Paying for College is one of the most difficult things |
| becomes taxable. | | | | most of us will ever do. Scholarships definitely help, just |
| It is incredibly important to keep records of all the | | | | make sure you keep track of how you spend each |
| things you spend your money on that came from | | | | scholarship dollar that you receive, and you should end |
| scholarship money. Keep a list of tuition, university fees, | | | | up just fine. It's a good idea to run your financial aid |
| books, and all the school supplies that you buy | | | | package passed your local accountant or CPA. Simply |
| because it's up to you to prove how much of the | | | | ask them if you owe any taxes and have them look |
| scholarship went to educated related purposes and | | | | through your financial aid package. It shouldn't cost you |
| how much of it went to other related purposes. | | | | very much to talk to a CPA for a few minutes, and |
| It may seem silly to have to keep records of a pizza | | | | the peace of mind will be well worth it. |