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