How do I report $3K taxable scholarship on 1040

[Pacun]

If I recall correctly, line 7 on 1040 used to dot SCH for taxable scholarship if entered correctly. How do I do that on the new 1040 line 1?

[Margaret CPA in OH]

The last one I had I put on Sch 1, Page 1, line z, Other Income. You can jump to the list which includes Taxable grants and more but I just added in the bottom space Taxable Scholarship and the amount.

[Pacun]

That's exactly what I did but I think there is a more elegant way of doing it. In any event, the end result is the same. 

I entered "Less scholarship already reported as income elsewhere in the return" 3,000. And then I entered 3K on Sch 1, other income, SCH 3,000

Thank you.

[TexTaxToo]

Sch. 1, line 8r is specifically for taxable scholarships and grants.  It no longer goes on Form 1040 line 1 as that is for earned income only.

[Randall]

Are you talking about taxable scholarships that would be included in earned income to increase the standard deduction for the student who's W2 was less than the standard deduction?  What about taxable 529 money?  Would that also increase the standard deduction?  It doesn't appear so on the ATX input.

[Pacun]

14 hours ago, Randall said:

Are you talking about taxable scholarships that would be included in earned income to increase the standard deduction for the student who's W2 was less than the standard deduction?  What about taxable 529 money?  Would that also increase the standard deduction?  It doesn't appear so on the ATX input.

No, I am just making the scholarship taxable so that AOC comes to play.

[TexTaxToo]

Taxable scholarships count as earned income for purposes of the filing requirement, but once the filing requirement is met, they do not count as earned income for other purposes (such as EIC) - unless they are reported on a W-2.

[Lion EA]

Kiddie Tax on taxable scholarships or no?

[TexTaxToo]

Yes, taxable scholarships count as unearned income for the kiddie tax, so if unearned income is more than $2,500 and they are otherwise subject to the kiddie tax, they have to file Form 8615 - but only if they are required to file.

For example, a student who is a dependent (so they cannot claim AOC for themselves), and has only scholarship income, would not have to file unless the scholarship income is over $13,850.  But once they hit the filing requirement, any amount over $2,500 would require Form 8615.

[Pacun]

so, technically, it is a no brainer to make it taxable since the parents return is not negatively affected... only the AOC benefit, correct?

At worst, the student would have to pay at parents rate.

[TexTaxToo]

Certainly, if the student isn't required to file.  If the student will have to file, you have to look at the phaseout range of the AOC (above 160K MFJ, 80K other).  At some point above that, the benefit to the parent will be offset by the cost to the student.

Also note that the first $2000 of expenses generates a 100% credit, but the next $2000 only 25% credit, so a combined marginal rate above 25% for the student would make it not worthwhile to claim more than $2000.