From the Financial Hotline
By: Financial Hotline
Spring 2026 (Vol. 44, No. 1)
Q: My daughter is heading off to college soon and is expecting to receive multiple scholarships. Is this funding tax-free?
A: Generally, scholarships received by degree candidates are tax-free to the extent they're used for qualified tuition and related expenses. These include tuition, mandatory fees and required books, supplies, and equipment. However, amounts used for nonqualified expenses, such as room and board or travel, are taxable.
Q: My son will have a job at college plus his total scholarship amounts will add up to more than the qualifying expenses. Do I report this on my return?
A: IF his taxable income (including any taxable scholarships) exceeds his standard deduction, he must file his own tax return. (Even if you claim him as a dependent) The taxable scholarship amount is typically reported as earned income on the student's tax form 1040. If a scholarship requires the student to perform services, such as teaching or research, the portion paid for those services must be reported as income and is generally taxable. However, exceptions apply.
Q: How do I prove how many miles I drive for business so I can take the deduction?
A: The IRS says you must keep a 'contemporaneous' record. A simple method is to keep a logbook or calendar that records the date, destination, business purpose and total miles traveled. Mobile apps such as MileIQ can assist in automatically logging trips. Be sure to record your odometer reading on January 1 and December 31 of the calendar year. Don't worry if you didn't keep a log, it's not too late to reconstruct using your receipts, email or other communication.
Business owners or self-employed who drive for business purposes will get a deduction boost in 2026. The IRS's standard mileage rate for business driving in 2026 is 72.5 cents per mile (up from 70 cents in 2025). Meanwhile, medical and moving mileage rates are 20.5 cents per mile, while the charitable rate is 14 cents.
You can choose to deduct eligible vehicle expenses based on business use under the actual expense method or by applying the standard mileage rate, which simplifies recordkeeping. Bear in mind, however, that the IRS requires documentation in either case.