A scholarship is generally an amount paid or allowed to a student at an educational institution for the purpose of the study. A fellowship grant is generally an amount paid or allowed to an individual for the purpose of study or research. Other types of grants include need-based grants (such as Pell Grants) and Fulbright grants.
NOTE: emergency financial aid grants under the Coronavirus Aid, Relief, and Economic Security Act, the COVID Relief Act, and the American Rescue Plan Act of 2021 for unexpected expenses, unmet financial needs, or expenses related to the disruption of campus operations on account of the COVID-19 pandemic, are not includible in your gross income.
Tax-Free
If you receive a scholarship, a fellowship grant, or another grant, all or part of the amounts you receive may be tax-free. Scholarships, fellowship grants, and other grants are tax-free if you meet the following conditions:
- You’re a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
- The amounts you receive are used to pay for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution.
Taxable
You must include in gross income:
- Amounts used for incidental expenses, such as room and board, travel, and optional equipment.
- Amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant. However, you don’t need to include in gross income any amounts you receive for services that are required by the National Health Service Corps Scholarship Program, the Armed Forces Health Professions Scholarship and Financial Assistance Program, or a comprehensive student work-learning-service program (as defined in section 448(e) of the Higher Education Act of 1965) operated by a work college.
How to Report
Generally, you report any portion of a scholarship, a fellowship grant, or another grant that you must include in gross income as follows:
- If filing Form 1040 or Form 1040-SR, include the taxable portion in the total amount reported on the “Wages, salaries, tips” line of your tax return. If the taxable amount wasn’t reported on Form W-2, enter “SCH” along with the taxable amount in the space to the left of the “Wages, salaries, tips” line.
- If filing Form 1040-NR, report the taxable amount on the “Scholarship and fellowship grants” line.
Estimated Tax Payments
If any part of your scholarship or fellowship grant is taxable, you may have to make estimated tax payments on the additional income.
Migration Resource Center Taxpayers Services
The Migration Resource Center staff has a team of tax consultants, tax attorneys, enrolled agents, and CPAs. We can assist you with tax planning as well as reducing taxes. In addition, we provide workshops on the Citizenship Interview and Test, Taxes, and Personal Finance. We offer workshops both online and in traditional classroom environments. Contact Migration Resource Center Taxpayer Services now for assistance with your taxpayer concerns. Use our online form or call (646) 827-2959.