If you receive a scholarship or fellowship grant for the purposes of education all or parts of the amounts you receive may be tax-free.
Scholarships are generally an amount paid or allowed to a student for the purpose of study at an educational institution. A fellowship is an amount given to an individual for the purpose of research at an educational institution. Qualified scholarship and fellowship grants are treated as tax-free if the student meets the following requirements:
- The student is a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and has a body of students in regular attendance at the place where it carries on its educational activities.
- The amount you receive as scholarship or fellowship grant money is used for tuition and fees required for enrollment or attendance at the educational institution or for fees books supplies and equipment required for courses at the educational institution.
- Gross income amounts used for incidental expenses such as room and board travel and optional equipment and generally amounts received as payments for teaching research or other services required must be included as a condition for receiving the scholarship or fellowship grant.
- Any part of the scholarship or fellowship that represents payments for services must also be included as income. Generally when reporting scholarship income on your taxes you will include the amounts on the same line as “Wages Salaries Tips etc.”
Any amounts received for services that are required by the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program does not need to be included as gross income.
If you have questions or would like more information on this topic please contact Lindemeyer CPA.