When Scholarships and Grants are Taxable

Are scholarships and grants taxable?

Scholarships and grants can be tax-free or taxable depending on how you use the money. A degree candidate may generally exclude scholarship funds used for qualified education expenses from taxable income. These expenses can include tuition, required fees, books, supplies, and equipment. Money used for other purposes may be taxable.

What scholarship expenses are generally considered qualified education expenses?

Qualified education expenses generally include required tuition and fees. They can also include books, supplies, and equipment required for your courses.

The terms of the scholarship or grant also matter. Funds designated for non-qualified expenses may receive different tax treatment.

Are scholarships used for room and board taxable?

Generally, yes. The IRS does not consider room and board a qualified education expense for this purpose.

Scholarship or grant money used for travel, personal expenses, or similar costs may also be taxable. You may need to include that portion of the funding in your taxable income.

Is money received for teaching or research taxable?

Generally, payments for teaching, research, or other required services count as taxable compensation.

This differs from scholarship funds used for qualified education expenses. Some specific scholarship programs may have different rules, so you should review the terms of the program and the type of payment you received.

Can part of a scholarship be tax-fee while another part is taxable?

Yes. A scholarship or grant can include both tax-free and taxable funds.

For example, money used for qualified tuition and required course expenses may be tax-free. Money designated for room, board, travel, or other personal expenses may be taxable.

Do I have to report taxable scholarship income if I do not receive a tax form?

Potentially, yes. You may still have to report taxable scholarship or fellowship income even if you do not receive a specific tax form.

If federal tax rules classify part of your educational assistance as taxable, you may need to include it on your income tax return. How you report it depends on the type of payment.