A scholarship is generally a payment made to a student at an educational institution to support their studies. A fellowship grant is typically awarded to individuals for study or research purposes. Other grants, such as Pell Grants and Fulbright grants, also fall under this category.
Tax-Free Scholarships and Grants
Scholarships, fellowships, and other grants may be tax-free if the following conditions are met:
You are a degree candidate at an educational institution with a regular faculty, curriculum, and student enrollment.
The funds are used to pay for tuition, required fees, books, supplies, or equipment necessary for enrollment or coursework.
Taxable Scholarships and Grants
You must include in gross income the following amounts:
Funds used for incidental expenses, such as room and board, travel, and optional equipment.
Payments received for teaching, research, or other services required as a condition of receiving the scholarship or fellowship.
However, you do not need to include payments received for services required by:
The National Health Service Corps Scholarship Program
The Armed Forces Health Professions Scholarship and Financial Assistance Program
A comprehensive student work-learning-service program (as defined in section 448(e) of the Higher Education Act of 1965) at a work college.
Reporting Scholarship and Grant Income
If any portion of a scholarship, fellowship grant, or other grant is taxable, report it as follows:
For Form 1040 or Form 1040-SR, include the taxable amount in Line 1a. If the taxable amount was not reported on Form W-2, enter it on Line 8 and attach Schedule 1 (Form 1040).
For Form 1040-NR, report the taxable amount on Line 8 and attach Schedule 1 (Form 1040).
Estimated Tax Payments
If any portion of your scholarship or fellowship grant is taxable, you may be required to make estimated tax payments on the additional income.