Recently, we have been working with a client with a child who received Scholarships and Grants for college in excess of their qualified tuition and fees. Great news for Mom and Dad, right!? Yes, but unbeknownst to the client, this has caused a taxable event for the student, by way of taxable income reported on line 7 of Form 1040.
So yes, scholarship money or grant awards to dependents that are in excess of the actual cost of their education may be taxable income for his or her parent. Check with your ShindelRock professional if you suspect your child is nearing the scholarship-to-expenses limit.