Question

I have a question regarding a tax free scholarship. Are scholarships tax free — How do I report a scholarship I received for education expenses?

Answer

A scholarship or fellowship is tax free, and you don’t need to report it if all of these apply:

  • You’re a candidate for a degree at an eligible educational institution.
  • You use the scholarship or fellowship to pay qualified education expenses.

You’re a candidate for a degree if you:

  • Attend a primary or secondary school
  • Pursue a degree at a college or university
  • Attend an accredited educational institution authorized to provide a:
    • Program that’s acceptable for full credit toward a bachelor’s or higher degree
    • Program of training to prepare students for gainful employment in a recognized occupation

An eligible educational institution is one that:

  • Maintains a regular faculty and curriculum
  • 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
    • Equipment

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. These include:

  • Fulbright Grants
  • Pell Grants
  • Other Title IV need-based education grants

Loans you take out to pay for education expenses are tax free, too. Since you’ll repay the loan, the amount isn’t included in income.

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