To opt for education from colleges and universities abroad is quite an exciting prospect, however on scholarships? Scholarships are a path towards education which wouldn’t be possible otherwise.
However, it is not an easy thing to get a scholarship and then study for free. There are some stages which you must pass through so that you can get scholarship. A candidate is required to please the interviewer with his skills so that he grants his request. In order to get scholarship, you need to pass through some stages of interviews.
It can be very difficult and a real pain if you have to pay off your scholarship taxes and student loans specially if you are on a tight budget. It is essential that you get rid of your taxes and student loan as soon as possible to avoid any problems.
What does it mean to pay taxes on scholarship money?
Tax credits can be applied on education but their eligibility can only be dependent if you are studying in school and paying the tuition fees. Its eligibility also depends if you have gotten out of school and paying back your taxes.
The two student loan tax credits which are listed by the department of education include:
The American opportunity credit can be claimed till four years and is worth till dollar 2500 for every student. Parents can take this credit while their children are still studying.
The lifetime learning credit can only be claimed while the student is studying. Once the student is out of school, it can not be claimed and the credit is worth up to dollar 2000 for each student.
It is upon you if you decide to pay your taxes and student loan repayment within 10 or 20 years under the income-based repayment plan. However, you should keep in mind that your actions can cause a difference to the tax situation. You should also always remember your tax rules and be done with your taxes and student loan as soon as it is possible. This rule applies to every student whether they are financing themselves or whether they are on scholarships.
You do have to pay taxes even when on scholarships!
Some students get admission in top universities and get the chance to study for free, however, some students with lesser grades do get the opportunity to get scholarships but they will also have to pay a few taxes.
There might be a chance that you do not feel like paying off your student loan and taxes but the student loan interest might attract your attention. This interest will be enough to make you start doing your payments specially if the amount payable is really less as is the case when you are studying on a 50 percent scholarship.
If a couple has an income of dollar 160000 or below it, they will qualify for the deduction of tax. However, single people or widows can only qualify if their earnings are above dollars 80000.
Scholarship money can be taxed only if they are used for travel purposes, board and room as well as other expenses which are not required for enrollment purposes. If you haven’t yet achieved your education degree, you must put in the entire amount of your scholarship in the taxable income.
The entire amount of scholarship will be taxable if you are a student who wishes to get a complete degree or if you make use of the entire scholarship program, as well as for other expenses which are non-qualified.
Wrapping up
On the whole, it is undoubtedly true that scholarship money is taxable and there are many conditions to it as well. It is not everyone who is eligible for the student loan interest deduction. It all depends upon the filing status as well as the income of a person. Apart from that, husband and wife can file separately but if they submit two separate tax returns, there is hardly any chance of the tax being eliminated.
