My daughter received a couple thousand dollars in scholarships that were written directly to her and not the school. We have put that money in a savings to help cover books and future school expences. I expect she has to show that as income since she has not yet paid it to the schools. But is there a savings she can put it in to shelter it until she pays it out?
Thank you in advance for your help.

According to the IRC Code Section 117, Gross income generally does not include any amount received:

1. As a qualified scholarship, fellowship, grant or qualified tuition reduction;

2. By a degree candidate;

3. At an educational institution;

4. If used for qualified tuition and related expenses which include tuition,
fees, books, supplies and equipment;

5. The recipient must actually use the money for its intended purpose.

But, the income exclusion does not apply to amounts representing payment for teaching, research, room, board or other incidental services. Thus, as long as your daughter uses the scholarship for tuition, fees, books, supplies and equipment and not for living expenses, then generally speaking none of the scholarship income would be taxable. So, there really is no reason to shelter the income from taxation!

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How do I show the money on my tax form? Do I show it at all? I am not sure, should I receive a 1099 from them.