Are scholarships taxable? Are grants taxable?
Receiving a college scholarship or grant can making paying for college a lot easier and help with your overall budget. But what about your taxes? OK, we know it’s probably not the first thing on your mind. But as tax time rolls around, you may be asking yourself, “Are scholarships taxable? Are grants taxable?”
The good news is that your scholarship and grant are not taxable if the money was for study or research for a degree-seeking student who spent the funds to pay qualified expenses at an eligible educational organization.
Let’s dig into exactly what that means with a few definitions:
A degree-seeking student is one:
- Pursuing studies for an associate, bachelor’s, or higher degree at an eligible educational institute,
- Enrolled in a program accepted for full credit toward a bachelor’s or higher degree,
- Pursuing studies or conducting research to meet the requirements for a professional certification in a recognized occupation, OR
- Enrolled in a program accredited by a national recognized accreditation agency and authorized under federal or state law.
An eligible educational organization is one:
- Whose primary function is the presentation of formal instruction,
- That maintains a regular faculty and curriculum, and
- Has a regularly enrolled body of students
Qualified education expenses include:
- Tuition and fees required to enroll at or attend an eligible educational institution
- Course-related expenses required of all students in your course of instruction. Expenses include fees, books, supplies and equipment (e.g. computers).
Have other student tax filing questions? Be sure to visit our Tax Guide for College Students and find out about student forms that can be filed for free.
Are scholarships taxable income?
If all the above describes your situation, you won’t need to report your grant or scholarship as taxable income on your return.
If that’s not you exactly, then you may find that some or all your award is taxable. Here are a few scenarios where that might apply.
Scholarship or grant income is taxable in the following situations.:
- Amounts received for incidental expenses such as room and board, travel, and optional equipment
- Amounts for payments for services including teaching, researching, or other services required as a condition of receiving the scholarship
However, National Health Services Corps Scholarships and Armed Forces Health Professions Scholarship and Financial Assistance Program payments, or certain student work-learning service programs aren’t taxable.
Do you have to pay taxes on grants?
Some grants are treated the same as a tax-free scholarship, and the amounts you use to pay for qualified education expenses are tax free.
- Fulbright Grants
- Pell Grants
- Other Title IV need-based education grants
If you’ve received one of the grants mentioned above and used the money appropriately, the grant money is not taxable.
What about student loans? Any loans you take out to pay for education expenses are tax free, too. Since its money you’ll need to pay back, the amount isn’t included in income. If you’re currently paying back your student loans, you may qualify for the student loan interest deduction.
Get help with your taxable scholarships and grants
If it turns out your scholarships and grants are taxable, don’t worry about getting your taxes done right. At H&R Block, you can find the expertise you need. Whether you file on your own with H&R Block Online or with a tax pro. We’ll be there with you every step of the way.
Free tax filing for students – Did you know some students can file for free with H&R Block? It’s true! Learn more who can file for free with H&R Block Free Online.
Get tips on reducing your taxable income through deductions, donations and more. Learn how your AGI can affect your tax refund.
Is your work-study income considered taxable by the IRS? Learn more from the tax experts at H&R Block.
How does the sale of business property affect your taxes? Learn about property classifications and get tax answers at H&R Block.
Learn more about rolling your 401K into an IRA with help from the tax experts at H&R Block.