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Scholarship Income

A scholarship is usually an amount a student receives to help in the pursuit of studies. The student can be either:

  • An undergraduate
  • A graduate student

Scholarship money can be any of these:

  • Tax-free
  • Partially taxable
  • Fully taxable

Tax-free income

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:

  • Tuition
  • Fees required by a qualified educational institution for:
    • Enrollment
    • Attendance
  • Expenses required of all students enrolled in a course, like:
    • Books
    • Fees
    • Equipment
    • Supplies

You can't claim expenses for:

  • Room and board
  • Travel
  • Research
  • Clerical help
  • Equipment that’s not required of all students enrolled in a course
  • Costs not required for enrollment

Partially taxable income

Scholarship money is taxable if used for these education expenses:

  • Room and board
  • Travel
  • Any other expense not required for enrollment

Report your taxable scholarship amount on one of these:

  • Form 1040, Line 7
  • Form 1040A, Line 7
  • Form 1040EZ, Line 1

If you didn’t receive a 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 one of these:

  • Form 1040, Line 7
  • Form 1040A, Line 7
  • 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 one of these:

  • Form 1040, Line 7
  • Form 1040A, Line 7
  • 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 these at www.irs.gov:

  • Publication 525: Taxable and Nontaxable Income
  • Publication 970: Tax Benefits for Education

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Calculators

So how much will you get (or owe) this year? That’s the million-dollar question. We happen to have three very useful calculators to help you estimate your refund or balance due.

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