Qualified
scholarship and fellowship grants are treated as tax–free amounts if all
the following conditions are met:
You are a candidate for a degree at an educational institution that
maintains a regular faculty and curriculum and normally has a regular
enrolled body of students in attendance at the place where it carries on
its educational activities;
Amounts you receive as a scholarship or fellowship are used for tuition
and fees required for enrollment or attendance at the educational
institution, or for books, supplies, and equipment required for courses
of instruction; and
The amounts received are not a payment for your services.
However, if you receive a scholarship award under the National Health
Service Corps Scholarship Program or the Armed Forces Health Professions
Scholarship and Financial Assistance Program, the amount received is tax
free without regard to any services you are obligated to perform.
You must include in gross income amounts used for incidental expenses,
such as room and board, travel, and optional equipment, as well as
amounts received as payments for teaching, research, or other services
required as a condition for receiving the scholarship or fellowship
grant.
If any part of your scholarship or fellowship grant is taxable, you may
have to make estimated tax payments. For more information refer to Topic
355 or to Publication 970 ,
Tax Benefits for Education.
