Are college scholarships considered taxable income?
If the scholarship money is used for tuition, fees or books then it is not taxed. However if you use scholarship money for room and board or other incidental living expenses then it should be claimed as taxable income.
Also for the grad students out there, if you work as a teachers assistant or research assistant then the amount you get paid for the TA or RA work may also be taxable.
Scholarship for tuition, fees or books = tax free
Scholarship for room & board, travel, personal = taxable
If you have a mix of scholarship money and other funds then you can avoid taxes on the scholarship by using your scholarship to pay for tuition, fees or books and then using your other funds to pay for room and board or other expenses.
Below is copied verbatim from the IRS topic 421 Scholarships and Fellowship Grants
- 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; and
- Amounts you receive as a scholarship or fellowship grant are used for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses of instruction.