[1]If you or your student receive a scholarship, a fellowship grant, or other grant, all or part of the amounts you receive may be tax-free, but there are parts that may not qualify and should be included as part of your gross income.
Tax-Free
Scholarships, fellowship grants, and other grants are tax-free if you meet the following conditions:
- You’re a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
- The amounts you receive are used to pay for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution.
Taxable
You must include the following portions of scholarships and grants in your gross income calculation:
- Amounts used for incidental expenses, such as room and board, travel, and optional equipment.
- Amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant. However, you don’t need to include in gross income any amounts you receive for services that are required by the National Health Service Corps Scholarship Program, the Armed Forces Health Professions Scholarship and Financial Assistance Program, or a comprehensive student work-learning-service program (as defined in section 448(e) of the Higher Education Act of 1965) operated by a work college.
Please note that emergency financial aid grants under the Coronavirus Aid, Relief, and Economic Security Act, the COVID Relief Act, and the American Rescue Plan Act of 2021 for unexpected expenses, unmet financial need, or expenses related to the disruption of campus operations on account of the COVID-19 pandemic, are not includible in your gross income. See Higher Education Emergency Grants Frequently Asked Questions [2] for more information.
If you or your student have questions about the tax implications of a scholarship or grant award, please contact a ShindelRock tax professional. [3]