Scholarship Money And Taxes
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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