A scholarship is usually an amount a student at an educational institution receives to help in the pursuit of studies. The student might be an undergraduate or a graduate student. Scholarship money can be tax-free, partially taxable, or fully taxable.
If you’re a degree-seeking student, don’t report scholarship money spent for qualified education expenses at a qualified educational institution.
Qualified education expenses are:
Fees required to enroll at or attend a qualified educational institution, like student-activity fees
Expenses required of all students enrolled in a course, like:
You can't claim expenses for:
Room and board
Costs not required for enrollment
Partially Taxable Income
Scholarship money is taxable if used for these education expenses:
Room and board
Any other expense not required for enrollment
Report your taxable scholarship amount on Form 1040 or Form 1040A, line 7, or Form 1040EZ, line 1. If you didn’t receive a Form W-2 listing the taxable amount, write "SCH" and the taxable amount on the dotted line to the left of line 7 or line 1.
Fully Taxable Income
If you're a non-degree student, include the full amount of your scholarship or fellowship in your taxable income. Do this:
Even if you didn’t receive a W-2
No matter what expenses you paid with the scholarship
Report the full amount of scholarship income on Form 1040 or Form 1040A, line 7, or Form 1040EZ, line 1. Write "SCH" and the amount on the dotted line to the left of line 7 or line 1.
The full amount of the scholarship is also taxable if both of these apply:
You’re a degree-seeking student.
You use the full scholarship for nonqualified expenses.
If both apply, report the full amount of scholarship income on Form 1040 or Form 1040A, line 7, or Form 1040EZ, line 1. Write "SCH" and the amount on the dotted line to the left of line 7 or line 1.
To learn more, see:
IRS Publication 525: Taxable and Nontaxable Income