Congratulations to all Scholly winners, and any scholarship winners in general! There’s nothing quite like the feeling of your hard work paying off and having some of that financial strain eased. However, as a scholarship winner there are some things you REALLY need to know.
Money from scholarships, grants, and fellowships can count as income, which means these funds can be taxable. And if they are taxable, you need to tell Uncle Sam. Keep reading for a 101 on taxes and scholarships.
A scholarship/grant/fellowship is tax free if:
You are a full-time or part-time student working towards a degree at a primary, secondary, or accredited post-secondary institution
The award goes toward tuition and fees to enroll or attend an educational institution
The award goes toward fees, books, supplies, and equipment required for your courses
Your award will be tax free only if you use it to cover expenses just summarized
A scholarship is taxed if it is used to cover:
room and board
fees, books, supplies, and equipment that are not required for the course or attendance
If your scholarship/grant/fellowship goes towards both tuition and room and board, the amount that covers tuition is tax-free and the amount that covers room and board is taxable. Making this adjustment will require you to adjust other parts of your tax return as well.
Say you are filing a deduction for educational expenses, you must subtract the tax-free amount of award money from your deduction. Generally speaking, items required for your course, or course attendance, are not taxable.
When in Doubt, Ask!
And ask asap. If you don’t know if your award is taxable, ask the scholarship program sponsoring the award. They will likely have information from the IRS about the tax status of your award money.
You can also be your own detective by going over the IRS’s benefits for education: https://www.irs.gov/newsroom/tax-benefits-for-education-information-center
Congrats to the winners and happy applying to our scholarship seekers, and if you haven't won yet remember to use Scholly to go make it happen!