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Here’s something to remember amid college financial aid season: The IRS might want its piece of your scholarship.
Sources of “free money,” including scholarships, assistantships and grants, are instrumental in helping families afford the growing cost of college.
The average annual price tag for in-state students at a four-year state school is $21,370, according to the College Board. That includes tuition, fees, room and board.
The cost was $48,510 for private institutions, the College Board found.
While you generally don’t have to repay scholarships and assistantships, the catch for families is that they may be subject to income tax.
“Any amount of the scholarship that’s used to pay for tuition, fees, books, supplies and any other equipment that’s required for the student’s courses is tax-free,” said Tracie Miller-Nobles, CPA and member of the American Institute of CPAs’ consumer financial education advocates.
“Where students get into trouble is when…