Tax-Free Scholarships and Fellowships
- A scholarship or fellowship is tax free (excludable from gross income) only if you are a candidate for a degree at an eligible educational institution.
- A scholarship or fellowship is tax free only to the extent:
- It does not exceed your expenses;
- It is not designated or earmarked for other purposes (such as room and board), and does not require (by its terms) that it cannot be used for qualified education expenses; and
- It does not represent payment for teaching, research, or other services required as a condition for receiving the scholarship.
Taxable Scholarships and FellowshipsÂ
If and to the extent your scholarship or fellowship does not meet the requirements described earlier, it is taxable and must be included in gross income. You can use Worksheet 1–1, Taxable Scholarship and Fellowship Income (pg 6) to figure the tax-free and taxable parts of your scholarship or fellowship.
