I have a question regarding a tax free scholarship. Are scholarships tax free — How do I report a scholarship I received for education expenses?
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:
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.
Lucky for you there are a number of education tax credits (and deductions). Learn about the American Opportunity Credit and Lifetime Learning Credit here.
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