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The income your daughter will receive is taxable.A stipend is defined as a fixed sum of money paid periodically for services or to defray expenses. The fact that remuneration is termed a "fee" or "stipend" rather than salary or wages is not important. Wages are generally subject to employment taxes and should be reported on Form W-2. Federal and state withholding taxes should be taken out of each paycheck so she should not need to worry about setting any aside or paying estimated taxes. The school should have required her to fill out a W4 for withholding. The mileage will not be a deductible item for your daughter unless she is required to use her vehicle in the course of her work (not just to get there and back home).
As far as her books and fees, the term "qualified tuition and related expenses" has been expanded to include expenditures for required course materials. For this purpose, the term "course materials" means books, supplies and equipment required for a course of study. Your daughter can use the amounts she spends as a credit or deduction whichever works out better for her on her tax return. Forty percent of the credit is refundable, so even those who owe no tax can get a refund possibly.
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