Guest Blogger: Madeline M. Martin
As almost anyone who knows me can attest, I am a college football fanatic. This time of year I usually focus my attention on recruiting. This month, February, is when high school seniors can formally commit.
It was recently reported throughout the sports media that Texas A&M recruit, Terrence McCoy, stated, upon signing with the Aggies:
They take care of you down there,” McCoy said. “I know from my brother they keep your pockets full, give you plenty of money, keep feeding you meals. Besides that all the help they give you with football. They keep you on your grades with private tutoring. Just good all-around.
So I began to wonder, what are the actual tax implications of “keeping your pockets full”? Even assuming that all of the “perks” are given according to NCAA regulations, it would seem that the new recruits should be made aware that some of these moneys would carry a tax burden.
According to Publication 520, A qualified scholarship or fellowship is any amount received as a scholarship or fellowship grant that is used under the terms of the grant for: Tuition and fees paid to enroll in, or to attend, an educational institution, or; fees, books, supplies, and equipment that are required for the courses at the educational institution. These items must be required of all students in the student’s course of instruction. However, an amount received for “incidental expenses” is not a tax-free qualified scholarship. Incidental expenses are expenses for items that are not required for either enrollment or attendance at an educational institution, or in a course of instruction at the educational institution. Incidental expenses include room and board; travel; research; clerical help, and; equipment.
The “excess” amounts should be reported on the student’s 1040 and is taxed as ordinary income. But then I’m sure that the top schools have special accountant departments to help the kids out – yet another perk.
