SC Scholarship Tax Information

Tax Information

Sterling City ISD is not in the business of providing tax advice but we would like to help clarify the possible tax implications of the Sterling City Scholarship award. If you have any further tax questions please seek advice from your tax professional.

Each year the students will get a Form 1098-T from their university or school. This 1098 will show the amount of deductible tuition and fees that the student paid to the school (this is not necessarily everything that they paid to the school). It will also show how much the school received on the student’s behalf in scholarships. This scholarship amount will include the Sterling scholarship amount as well as any additional scholarships received on behalf of the student. If the scholarship amount is greater than the tuition amount, then the student (or the student’s parents if they are still claimed as a dependent) will not be eligible to claim the $2,500 American Opportunities Credit (AOTC), Lifetime Learning Credit (LLC) or the tuition deduction. Just because the scholarship amount is greater than the tuition amount , this does not mean that the student has a tax issue it just means that they cannot take the tax deductions. The student only has a taxable income situation if the total scholarships received is greater than the total cost incurred for the student to get the education. This is checked on a year by year basis. The total cost that can be used to offset the scholarships is: tuition, school fees, other expenses charged by the school but not reported on 1098-T (such as lab fees, athletic fees, etc.), necessary costs to attend classes (computers, calculators, etc.), books, software, room and board. If all the expenses for the year are greater than the scholarships received, there is no taxable situation. If the expenses are less than the scholarships, then they need to claim the difference as a taxable income.

The information provided is to give you a guide on what to expect from your Area Foundation Scholarship at the time of reporting taxes. If you have any questions please seek advise from a tax professional.