Are Scholarships Taxable?

The answer is possibly. can be partially tax-free, while some of the funding is considered taxable. It depends on how the funds are allocated.

If you are a full or part-time student working toward a degree at an eligible educational institution, including primary, secondary or post-secondary schools, then your scholarship is likely tax-free. There are certain expenses that the scholarship or fellowship can be used for in order to remain tax-free. Non-taxable scholarships must be applied to tuition, fees, books, supplies, and required equipment for your courses.

Your scholarship is taxable if you used any part of it for room and board, travel, research, clerical equipment, or other similar expenses. However, only the portion used for these expenses is considered taxable, as the amount used for tuition remains tax-free.

You don’t have to file a tax return if your scholarship is tax-free and it was the only income you had for the year.

Pell and Fulbright Scholarships are often treated similarly when determining the amount that is tax-free. As long as they are used for qualifying educational expenses, Pell, Title IV and other need-based , are generally tax-free. Benefits given to veterans, like educational payments, trainings, or assistance are tax-free and do not need to be reported as income when filing a return.