Trumps "tax cut" taxing students like trust fund babies

[cpamomfromtexas]

I warned people about this, apparently people are just starting to figure this out.

WASHINGTON — A little-noticed provision in President Trump’s sprawling new tax law is treating middle- and low-income college students as if they are trust-fund babies, taxing sizable financial aid packages at a rate first established 33 years ago to prevent wealthy parents from funneling money to their children to lower their tax burdens.
Higher-education leaders are calling on Congress to fix the provision, which drastically raised the tax rate on so-called unearned income for children with assets and young adults in school. Students with large financial aid packages are finding their nontuition assistance for items such as room and board taxed by as much as 37 percent, even if their family income tax rates are much lower.
The impact on full-time undergraduate and graduate students under the age of 24 went largely unnoticed until the waning weeks of tax season. But word is spreading. About 1.3 million undergraduate students and 15,000 graduate students have scholarships and grant aid that cover nontuition expenses.


https://www.nytimes.com/2019/05/17/us/politics/college-scholarships-tax-increases.html

[Freethinker65]

1. Yep. My friends two national merit honors kids got nailed with it.

I am still pissed that daddy Bush taxed my tuition benefit. I was making $9/hr at the University while getting a Masters and no money even changed hands ...except for the taxes I ended up paying to the feds. The Republicans refused to renew the exemption.

[cpamomfromtexas]

2. My son will get hit also. I share your outrage.

[MissB]

3. Yep. Both my kids get scholarships that exceed the cost of tuition, fees and books.

One kid gets a full ride, so the excess $ that he gets as cash is taxed at the estate tax rate. However, he also has a bunch of earned income (he works remotely for a consulting firm) so base on that he’s able to file independently from us and gets the $12k deduction. The other kid doesn’t get that much beyond the tuition, fees and book $, so we have to we pay the estate tax on that.

And that’s fine for us- it isn’t horribly damaging. What sucks about this is that it hits low and middle income folks that have to scramble to figure out how to pay the tax due.