Is a Scholarship Taxable?

Is your student’s scholarship taxable?  Maybe.

If your student receives a scholarship, all or part of the amounts received may be tax-free if your student meets the following conditions:

• The student is 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 received 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.

However, what if your student also receives additional scholarships?

You must include in gross income amounts used for incidental expenses, such as room and board, travel, and optional equipment.