Financial Aid and Income Taxes
The following is general information regarding student financial aid and income taxes, which should be used by students when completing federal and state tax returns.
1. Any portion of grants and scholarships which pays for Cost of Education (tuition), fees and books (such as PELL, Access Missouri, SEOG, Work Study, C of O Grant, etc.) is not taxable, and not considered taxable income on the student’s federal or state tax return.
2. Any portion of grants and scholarships which pays for room and board (outside scholarships, Summer Work Program, academic, athletic, etc.) is taxable and must be reported as taxable income on the student’s federal and state tax return if the student is required to file a return. Students who worked on campus during summer 2014 to pay for 14-15 room and board must consider the value of that summer work as taxable income, because such work is considered an educational scholarship. The value for 12 weeks worked in summer 2014 is $8,525 ($6,200 for 14-15 room and board plus $2,325 for room and board during the 12 weeks). The value for either 6 week session worked in summer 2014 is $4262 ($3,100 for fall 2014 plus $1,162 for room and board during the 6 weeks). The appropriate amount should be noted as ‘taxable scholarship” on the student’s tax return for 2014. Educational loans are considered to be neither a grant nor a scholarship, and are not taxable.
3. The IRS American Opportunity or Lifetime Learning tax credits are available for 2014 for qualified educational expenses. (Note the Health/Technology/Service fee and room & board are not a qualified expense for any of the credits.) Also see the 1098-T FAQs and the instructions for IRS Form 8863.
4. Any student financial aid described above which is determined to be taxable income should be included on the student’s federal and state tax returns, as required by law. The College does not employ either a tax accountant or an attorney, and therefore cannot offer individual tax-related counsel to students.
More information concerning scholarships can be found on the IRS website at www.irs.gov.
1098 Frequently Asked Questions
College of the Ozarks
1098T FAQ -- Calendar Year 2014
Q1. What is Form 1098T? It is an informational statement that colleges are required to provide to certain students (and the IRS) to report the amount of qualified expenses billed, all scholarships and grants received (for both qualified and non-qualified expenses), and whether the student was enrolled at least-half time.
Q2. What is a qualified/non-qualified expense? Qualified expenses are those eligible for a tax credit or deduction, while non-qualified expenses are not eligible for a credit or deduction. C of O’s Cost of Education, part-time class charges, and certain class-related fees are qualified expenses (but see Q3 & Q5), but room and board and the HTS fee are non-qualified expenses. Qualified expenses billed to C of O students in 2014 are reported in Box 2.
Q3. Who should receive a 1098T? Colleges are not required to provide a 1098T to students whose qualified expenses are waived or paid entirely with scholarships or grants. Because the College provides 100% of the Cost of Education for full-time students through a combination of the work program, federal, state, and institutional funds, most C of O students will not receive a 1098T. Students who paid for work hours, part-time class charges, or required class fees should receive a 1098T.
Q4. Since I received Form 1098T, will I qualify for a tax credit? Not necessarily. Two education tax credits are in place for 2014: The American Opportunity Credit and the Lifetime Learning Credit (both use IRS Form 8863). Under IRS guidelines, students or parents may claim an education tax credit based only on qualified expenses actually paid by the student or parent during the year.
(NOTE: amounts paid by students or parents are not reported on the 1098T.)
Q5. Does the amount in Box 2 of my 1098T equal the qualified expenses I can claim as a tax credit? No. The College is required to report the total qualified expenses billed (Box 2) and all scholarship/grant amounts applied to a student’s account (Box 5), but you must review your payment records to determine if you paid for any qualified expenses. Examples of payments for qualified expenses include cash payments for work hours, part-time class charges, and required class fees. Students can obtain payment history in My Account Info/My Account Balances in Campusweb.
Q6. Can I claim a tax credit or a deduction for the amount I paid for room and board? No. Room and board charges are defined as non-qualified expenses. Payments for non-qualified expenses are not eligible for a tax credit or a tax deduction.
Q7. Are room and board scholarships taxable? Yes. Any scholarship used to pay for non-qualified expenses is considered taxable income to the student and should be reported on the student’s tax return (this includes the Summer Work Program and any other room and board scholarship). The IRS does not require colleges to issue any type of form to students showing these taxable scholarship amounts. More information regarding the taxability of the Summer Work Program and any other room and board scholarship can be found at www.cofo.edu, under Admissions/Financial Aid/Tax Information.
Q8. Who should I contact with questions? For questions about the amounts reported on the 1098T, contact Cash Accounts at ext. 2501 to set up an appointment. College of the Ozarks cannot provide tax advice to students or parents. For questions about tax credit eligibility or filing for the tax credit, consult Publication 970, the instructions for Form 8863, your tax advisor, or the IRS.