Archive for March 25th, 2013

March 25, 2013

Reminder – college scholarships that pay for room and board are taxable

by Grace

College scholarships that pay for room and board are taxable.  Here are more details from IRS Publication 970 on the types of scholarships and fellowships that are tax exempt.

Tax-Free Scholarships and Fellowships
A scholarship or fellowship is tax free (excludable from gross income) only if you are a candidate for a degree at an eligible educational institution.

A scholarship or fellowship is tax free only to the extent:

  • It does not exceed your expenses;
  • It is not designated or earmarked for other purposes (such as room and board), and does not require (by its terms) that it cannot be used for qualified education expenses; and
  • It does not represent payment for teaching, research, or other services required as a condition for receiving the scholarship….

Worksheet 1–1 is used to calculate the amount of scholarship aid that can be excluded from gross income.  If your only income is a tax-free scholarship, you do not need to file a tax return.

Work-study earnings are taxable, included in the IRS category of payment for services.

A summary from the IRS:  Parents and Students: Check Out College Tax Benefits for 2012 and Years Ahead

Related:  Tax season reminders about education tax benefits (Cost of College)

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