Are scholarships taxable income?

The rule

Publication 17 states that a candidate for a degree can exclude amounts received as a qualified scholarship or fellowship. A qualified scholarship or fellowship is any amount you receive that is for tuition and fees to enroll at or attend an educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution. Amounts used for room and board do not qualify for the exclusion. Pub. 970, Tax Benefits for Education, has the full discussion, and the rules here come from both publications.

The word “qualified” is the test. A scholarship is not tax free because it is called a scholarship; it is tax free to the extent it is spent on qualifying costs. If a grant is bigger than your tuition, fees and required course materials, the rest is taxable even if you spent it on a legitimate living cost.

Payment for services

In most cases you must include in income the part of any scholarship or fellowship that represents payment for past, present, or future teaching, research, or other services. This applies even if all candidates for a degree must perform the services to receive the degree. A teaching assistantship that credits $2,000 toward your tuition in exchange for work is compensation, and that $2,000 is taxable even though it reduced your bill. Pub. 970 adds that the taxable amount must be included whether or not you received a Form W-2.

Military service academies are a related case: an appointment to a U.S. military academy is not a scholarship or fellowship grant, and pay received as a cadet or midshipman is pay for personal services reported on Form W-2.

Worked example

A student receives a $14,000 scholarship. Of that, $2,000 is stated to be pay for research services. The student paid $9,000 in tuition and fees and $500 for books required for the courses. The part not for services is $12,000. Qualified costs are $9,000 + $500 = $9,500, so $9,500 is tax free. The taxable part is $14,000 − $9,500 = $4,500, which is the $2,000 for services plus the $2,500 of the remaining grant that exceeded qualified costs. Enter those numbers in the calculator above to check.

A second case: a $20,000 scholarship, $12,000 of tuition and fees, $800 of required books and $7,200 of room and board, with no services. The qualified costs are $12,800, so $12,800 is tax free and $7,200 is taxable. The $7,200 is the room and board, which never qualifies. This is the usual way a full-ride scholarship becomes partly taxable.

Where taxable amounts go

Pub. 970 explains that if your only income is a completely tax-free scholarship or fellowship grant, you do not have to file a tax return and no reporting is needed. If part is taxable and you are required to file, you report the taxable amount whether or not you received a Form W-2. On Form 1040 or 1040-SR, include any taxable amount reported to you in box 1 of Form W-2 in the total on line 1a, and include any taxable amount not reported in box 1 on Schedule 1 (Form 1040), line 8r. Form 1040-NR filers report the taxable amount on Schedule 1, line 8r.

Other kinds of aid

Several related payments get their own treatment in the publications. Pell Grants and other Title IV need-based education grants are treated as scholarships: tax free to the extent used for qualified education expenses during the period for which the grant is awarded. A Fulbright grant is generally treated as a scholarship or fellowship in figuring the tax-free amount. Department of Veterans Affairs allowances are not included in income and are not considered scholarship or fellowship grants. And a scholarship prize won in a contest is not a scholarship if you do not have to use it for educational purposes; you must include it in income on Schedule 1, line 8i, whether or not you spend it on education.

Limits and practical tips

Pub. 970 also covers how tax-free aid interacts with education credits and other benefits, and it is worth reading before you claim a credit for the same tuition. That decision depends on your whole return and is worth a conversation with a tax preparer. Compare the result to your federal income tax, and check whether you can be claimed as a dependent, which affects your own filing requirement.

Sources

• IRS Publication 17, Your Federal Income Tax (2025): Scholarships and fellowships under Miscellaneous Income (chapter 8). Read November 2, 2026.
• IRS Publication 970, Tax Benefits for Education (2025): Taxable Scholarships and Fellowship Grants; Reporting Scholarships and Fellowship Grants; Other Types of Educational Assistance. Read November 2, 2026.

Edition read: Publication 17 (2025), Your Federal Income Tax, for use in preparing 2025 returns. Dollar limits and dates are for the 2025 tax year unless the text says otherwise; check the current publication and form instructions for your tax year. This page summarizes the publication and does not replace it.