Are college scholarships taxable?

Scholarships can be a great way to help with college costs. Offered by a range of institutions from the federal government, companies, nonprofits, and colleges and universities, for the most part, scholarship funds don’t need to be repaid. There's also no limit to the number of scholarships students can apply for.

As advantageous as scholarships can be, when it comes to receiving scholarships to help pay for college, the last thing you want to worry about is whether you’ll get taxed on them.

A few of the questions that might be top of mind: Are scholarships considered taxable income? What requirements need to be met to ensure you don’t get taxed on scholarships? And if some or all of your scholarship funds will get taxed, how do you declare it as income on your tax returns?

Below, you’ll find some helpful information about whether or not your scholarship money is taxable.

Are college scholarships taxable?

If you receive a scholarship, according to the Internal Revenue Service (IRS), it may be considered tax-free if you meet the following conditions:

• You're an individual pursuing a degree from an educational institution with an established faculty and curriculum, and the institution typically maintains an ongoing enrollment of students at a physical location where educational activities occur.
• The funds you receive are used to pay for tuition, fees, or certain school-related expenses at the institution.

In simple terms, if you use scholarship funds to help pay for tuition and fees or certain expenses at an accredited college or university, the funds might not be taxable.

Do scholarships ever count as income?

According to the IRS, all or a portion of your scholarships may be considered taxable income if they are:

• Used for certain expenses that are considered “incidental.” For instance, for room and board or travel.
• If some funds are considered a payment. For instance, payments received for teaching, research, or other services might be a condition for receiving certain scholarship funds. Those payments might be considered taxable income.

If you have questions about whether your scholarships are considered taxable income, it’s best to seek the advice of a tax professional.

How do I report my taxable income on my taxes?

There are a few ways to report your taxable income — including scholarship income that may be considered taxable — but you may want to talk to a tax professional before doing it yourself.

You should generally report the taxable portion of your scholarship funds as follows:

• For individuals filing Form 1040 or Form 1040-SR,  include the taxable portion in the total amount reported on Line 1a of your tax return. 
• If the taxable amount wasn't reported on Form W-2, enter it on Line 8 of your tax return.
• If filing Form 1040-NR,  report the taxable amount on Line 8 “Additional income from Schedule 1” of your tax return.

Final thoughts

Whether or not your scholarship money is taxable is highly dependent on how you use your funds. If you’re concerned your scholarship is taxable income, talk to a tax professional to gain insights on how to make sure you file your taxes properly.