A scholarship is generally an amount paid or allowed to, or for the benefit of, a student at an educational institution to help in the pursuit of studies. The student may be either an undergraduate or graduate. Scholarship money can be tax-free, partially taxable, or fully taxable.
For these purposes, the following expenses are considered qualified education expenses for a degree candidate at a qualified educational institution:
Tuition and fees required to enroll at or attend an eligible educational institution, and
Course related expenses, such as fees, books, equipment, and supplies that are required for the courses at the eligible educational institution. Qualified fees, equipment, and supplies include student-activity fees and expenses for course-related supplies and equipment. In addition, the expense must be required of all students enrolled in the course.
In addition, the expense must be required of all students enrolled in the course.
You can’t claim expenses for room and board, travel, research, clerical help, equipment, or any other cost that isn’t required for enrollment.
You’re responsible for determining whether or not you used the scholarship money for qualified education expenses. If you use any of the money to pay for room and board, travel, or any other expense not required for enrollment, that part of the money is taxable. If this is the case, you need to include the taxable amount on Form 1040 or Form 1040A, line 7, or Form 1040EZ, line 1. If the taxable amount was not reported on Form W-2, make sure to write "SCH" and the taxable amount on the dotted line to the left of the corresponding tax return line. If you use the Interview, we’ll make sure the income is reported correctly.
If you’re a non-degree candidate, you should include the full amount of your scholarship or fellowship in your taxable income, regardless of whether or not you receive a W-2 form and regardless of what expenses you paid with the income. If this is the case, you need to include the full amount of scholarship income on Form 1040 or Form 1040A, line 7, or Form 1040EZ, line 1. Make sure to write "SCH" and the amount on the dotted line to the left of the corresponding tax return line.
If you are a degree candidate, and you use the full scholarship for nonqualified expenses then the full amount of the scholarship is taxable. You need to include the full amount on Form 1040 or Form 1040A, line 7, or Form 1040EZ, line 1. Make sure to write "SCH" and the amount on the dotted line to the left of the corresponding tax return line.
If you use the Interview, we’ll make sure the income is correctly reported.
For more information, see these resources: