Question about Work-Study?

Question

I'm going to be a freshman in college and I got work-study as part of my financial aid package (for $2,100). If I make more than $2,100 during the year and apply every penny of it to my tuition, do I still have to pay income tax?

I live in Ohio (and will be going to school in Indiana) if that matters.

Answer 1

The answer is "yes" - work-study income is taxable.

The IRS rules on scholarships and grants say that any money that is used for tuition, books, supplies and equipment that is required of all students in that course of study is tax-free UNLESS that money was paid to the student in exchange for services.

Work-study funds are clearly income paid to you in exchange for services (your work), and therefore they do not qualify as tax-exempt income for federal income tax purposes.

Even if the money is used exclusively for tuition and other eligible educational expenses, you will receive a W-2 form from your employer, and you will be responsible for filing a federal income tax return.

However - if your total income is only $2100, you're probably going to WANT to file your return, as you should be eligible for a refund of most, if not all, of any income taxes that were withheld during the course of the year.

I hope this helped!