Are scholarships taxable in the US and how to report them?

Answer:

In the United States, scholarships can be taxable — but it depends on how you use the money.

1. When Scholarships Are Not Taxable

Your scholarship or grant is tax-free if:

• You are enrolled in a degree program at an eligible educational institution

• The funds are used for qualified education expenses, such as:

  • Tuition and fees
  • Required books, supplies, and equipment

2. When Scholarships Are Taxable

You must pay taxes on the scholarship money if it is used for:

• Room and board (housing and meals)
• Travel expenses
• Optional equipment or supplies not required for your course
• Stipends for living expenses

These amounts are considered taxable income.

3. How to Report a Taxable Scholarship

1. Determine the taxable portion

   • Add up all scholarship funds you received
   • Subtract the amount used for qualified expenses
   • The remainder is taxable

2. Include it on your tax return

   • If you file Form 1040, report the taxable portion as part of your income
   • Typically, it’s included under "Wages, salaries, tips" with “SCH” written in the margin next to the amount

3. Keep all receipts and records

   • Proof of tuition payments, book purchases, and equipment costs
   • Award letters stating the scholarship amount and purpose

✅ Example
You receive a \$15,000 scholarship.

• \$12,000 goes toward tuition and required books (tax-free)
• \$3,000 covers housing (taxable)

You would only report \$3,000 as taxable income.

If you’d like, I can prepare a simple table showing exactly which scholarship expenses are taxable vs. tax-free in the U.S. Would you like me to do that?