Gregory S. DuPont
Taxes and Scholarship Income
Students who receive scholarships or grants need to be aware that some funding they are awarded may be taxable. The portion of a scholarship that is taxable is that which applies to room, board, travel, and other noneducational expenses. On the other hand, scholarship dollars used for tuition, fees, books, supplies, and course-required equipment are nontaxable.
If taxes are due, they are payable by the scholarship recipient. Generally, students do not receive enough yearly income to owe tax, especially if they file independently and can take a personal exemption. However, students claimed on their parents’ tax return might not fare as well.
The key is to apply scholarship dollars to tax-free expenses—such as tuition and fees—first. The taxable portion of the scholarship will be essentially what’s left over. School bills should detail these items specifically and show the scholarship amounts received.
Teaching grants or project assistantships are nontaxable if they are integral to a student’s chosen field of study. However, research assistantships that benefit the academic institution, rather than the student, are taxable.
Receiving a scholarship can be a major education funding boost, but it is equally important that the scholarship recipient remains informed of the sometimes “taxing” issue of scholarship dollars. A review with a qualified tax professional can help alleviate any concerns and keep you on track to meet your overall objectives.