Home | Tax Blog | Tax Evaluation | Resources | Common Tax Questions | Back Taxes | Contact Us

Saving for College #3: IRS Treatment of Scholarships and Grants

September 28th

college tuition and taxesToday the best chance for an affordable college education is some kind of financial assistance in the form of a scholarship, grant, or fellowship. While these can all be exceptionally helpful in making college a financially viable option, it is also important to understand how such aid will affect your tax bill so you don’t end up with tax debt.

Scholarships and Fellowships

Scholarships and fellowships are only tax-free if the taxpayer is a candidate for a degree at an eligible educational institution, and the taxpayer intends to use the money to pay for qualifying educational expenses. Eligible institutions must have a regular faculty and curriculum and a regularly enrolled body of students. In order to qualify as tax-free, the scholarship or fellowship must be used for qualifying expenses such as tuition or enrollment fees, or any related expenses such as books and supplies.

However, if the scholarship or fellowship is used for expenses like room and board, travel, or research, the money will not qualify for tax-exempt status. There are some exceptions to this rule, so taxpayers who think they might qualify should investigate further. The best option is to consult the IRS website and discuss options with a tax attorney who can investigate your personal situation.


Whether or not a grant qualifies for tax-exempt status is dependent on the type of grant in question. The most commonly given grants, federal Pell Grants and other Title IV need-based education grants, are typically treated as scholarships for tax purposes. These grants are tax-free, but only during the period for which the grant is given.



Subscribe Now

Follow on FaceBook
News & Events
Monday, August 01, 2011

We are excited to launch our new site LeeTaxHelp.com.
Monday, September 05, 2011

If you think you might be need the advice of a Dallas Bankruptcy Attorney you can view on sister site at http://leebankruptcy.com
Back Taxes (5) General Tax Information (65) News (39) Payroll Taxes (5) Tax audit (10) Tax Debts (3) Tax deductions (16) Tax Fraud (4) Tax Laws (14) Tax Liens (10) Tax payment plans (14) Tax programs (21) Tax Scams (6) Uncategorized (2)
Recent Posts
Advantages of Using a Tax Debt Lawyer
Tax Debt Relief In 2014
Tax Debt Installment Agreements
Understanding the Five Tax Debt Strategies
Back Taxes: What You Can Do
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011