Raife Neuman, of Bonner & Partners Family office, continues his campaign on the injustices of the American education system.

As we all know, often the better you do the more the government wants to penalize your success. Families and college students often pay exorbitant costs for education. And, as I wrote last week, students who go on to get a professional degree are often saddled with loads of debt – creating a new class of indentured servants. You’d think the IRS could cut them a bit of a break. But you’d be wrong.The tax code says “all or part” of a scholarship or fellowship “may be tax free.” The emphasis should be on “may” because you have to meet these strict conditions to avoid taxes:
• You are a candidate for a degree at an educational institution that has “a regular faculty and curriculum” and that “normally has a regular enrolled body of students in attendance at the place where it carries on its educational activities.”
• The amounts you receive are used for “tuition and fees required for enrollment or attendance at the educational institution, or for books, supplies, and equipment required for courses of instruction.” So basically if you have to spend the money that you get you don’t have to pay taxes on it. But here’s the kicker.You do have to pay taxes on “incidental expenses” such as “room and board, travel, optional equipment, and generally amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant.” But these expenses aren’t really incidental – you have to get to school to go to school.

  With the exception of some former classmates of mine who lived in tents in the hills (and who were constantly hounded by the administration) you need a roof over your head to study.  And god forbid you have a little spending money while you put yourself into years of debt. Penalizing success, an American tradition.