Is my Scholarship considered income and subject to income taxes?
What you use your scholarship money for may determine whether you pay taxes on it.
A scholarship or fellowship is tax-free if:
• You are a full-time or part-time candidate for a degree at a primary, secondary or accredited post-secondary institution.
• The award covers tuition and fees to enroll in or attend an educational institution
• The award covers fees, books, supplies and equipment required for your courses.
The award is tax-free only as long as you use it for the purposes outlined above.
Your scholarship or fellowship is taxed if it is used to cover room and board, travel, research, clerical help or equipment.
If your award, for example, covers both tuition and room and board, the amount you use for tuition is tax-free, while the amount you use for room and board is taxable.
If you need to make this adjustment, you may have to adjust other parts of your return as well. For example, if you are filing a deduction for educational expenses, you must reduce the amount of your deduction by the tax-free amount of the award.
If you’re not sure if your award is taxable, ask the organization that sponsored the award. They may have information from the IRS regarding your award’s tax status.
Additional information is available directly from the Internal Revenue Service. Check the IRS Web site, call the IRS help line at 1-800-829-1040, or download IRS Publication 970, which covers the tax benefits of education
Questions for Deborah Ritz can be e-mailed to WeeklyADK@yahoo.com
