Scholarships and Fellowship Grants

Taxable income or not?

With the price of college increasing every year, scholarships and grants can be a welcome relief. But are there tax consequences to accepting an award?

Typically, qualified scholarships for the purpose of study are excluded from the student’s income. “Quali­fied scholarships” refer to any amount received by an individual as a scholarship or fellowship grant to be used for qualified tuition and related expenses, including:

•   Tuition and fees required for the enrollment or attendance of a student at a qualified educational institution.

•   Fees, books, supplies and equipment required for courses of instruction at the qualified educational institution.

Any amounts you receive for room and board are not excludable and need to be reported as income on your tax return. You must also include in gross income any amounts received as payment for teaching, research or other services required as a condition for receiving the scholarship or fellowship grant. However, you do not need to include in gross income any amounts you receive for services that are required by the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program.

Bottom line: Depending on what the scholarship is used for, it may be subject to tax.