A scholarship is generally an amount paid or allowed to a student at an educational institution (college or university) for the purpose of study. A fellowship is generally an amount paid to an individual for the purpose of research. If you receive a scholarship or fellowship grant, all or part of the amount(s) may be tax-free to you.
Qualified scholarship(s) and fellowship grants are treated as tax-free if you meet the following conditions:
- You are a candidate (student) for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled student body in attendance where it carries on its educational activities (campus); and
- Amounts you receive as a scholarship(s) and fellowship grants are used for tuition and fees required for enrollment or attendance at the educational institution, or for books, supplies, and equipment required for courses at the educational institution.
Note: If you meet the two conditions above, you do not have to report the applicable amounts of your scholarship(s) or fellowship grant(s) as income on your tax return.
You must include in your tax return (as gross income) amounts used for incidental expenses, such as room and board, travel, and optional equipment, and generally amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant. For additional information pertaining to Tax Benefits for Education, please refer to IRS Publication 970.