If you receive a scholarship, all or part of the amount received may be tax-free.
Typically the portion of a scholarship or fellowship grant is tax free, which means that it’s excluded from your gross (before tax) income, as long as it’s used for qualified education expenses. Qualified education expenses include the tuition, fees, books, supplies and equipment required for your courses. It does not include room and board, travel, or any expenses that are not required for your course.
Scholarships, fellowship grants, and other grants are tax-free if you meet the following conditions:
- You're a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities.
- The amounts you receive are used to pay 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.
- The amounts are not used for incidental expenses, such as room and board, travel, and optional equipment.
- The amount received are not used as for teaching, research, or other services. However, you don't 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.