What is the name of your state (only U.S. law)? Kentucky
First a little background: I am an 18 year old, high school senior living with my parents in Lexington, KY.
Last May, I attended the Intel International Science and Engineering fair in San Jose, California, and ended up winning $7,000 in prize money. $750 was from the fair itself, and $6250 was from a special award sponsored by the company Ricoh. I don't know if this makes a difference or not, but I was a minor at the time.
I spent $2,000 of this money on a new macbook pro for use in college, and the other $5,000 I gave to my parents to help pay off debt and to pay for the gas I use in my car.
My question has two parts to it: How should I label this money for taxes, and can I report the money so that I get the most from college financial aid (FAFSA).
1) Taxes- My only real question here is whether I can claim any of the money as a gift. I have heard that up to 5,000 can be given as an untaxed gift, but I have no idea if this is true, and I have no idea if prize money could qualify as a gift. If not, I was just going to claim it as income. Is there anything else I can do with it?
2) College financial aid-
I applied to a number of colleges, including Harvard, Duke, Vanderbilt, Boston College, and Cornell, all of which give good financial aid. Colleges look at my parents income, my income, my assets, and my parents assets, as well as a number of other factors. Generally, they take a higher percentage of the student income and assets than the parents (I have heard they take 5.6% of parents' assets, and 35% of student's assets). I have no real assets anymore, only a few hundred dollars, and my parents don't really have any assets either, only around 35k in home equity. Also, my older sister is currently in college, and my mother is a PhD student, and will graduate with a PhD in statistics in a few years.
My question is how to claim the $7,000 in order to get the highest possible financial aid package from colleges. The way I see it, there are two possible ways to make this happen, but I don't know whether I can legally do either of the two.
The first method is to claim $5,000 as a gift and then two thousand as income. Since I don't have much of the $7,000, I don't have any assets for them to take, and the amount of money they would take as a result of my income would be reduced because I would only have $2,000 in listed income.
The second way that I can see is to claim $2,000 as my income, then since my parents got $5,000 of it, to claim that as their income. The only reason I think this might work is because I was a minor at the time, and still living with them, but I honestly don't know anything about the law behind this.
Any suggestions you have would be great. My first priority is getting the most amount of financial aid for colleges.