Money always seems to be fraught with complications. Who wants to worry about taxes while figuring out financial aid and how to pay for your college education. Hopefully, this article will help clarify and simplify some questions you may have.
So, are scholarships taxable income? It depends on what you use their funds for.
Tuition Payments & Required Fees
If you’re a degree-seeking student who plans on using scholarship funds to pay for university required fees–like tuition, books, mandatory materials, etc. then that scholarship is tax-exempt. No need to worry about taxes here.
Many scholarships will actually require you to use their funds for tuition payments anyway. A lot of scholarship aid opportunities have strict guidelines about what you can and cannot use their funds for.
Room and Board & Living Expenses
If you’re using funds from a scholarship to pay for your housing situation or to purchase food, clothes, etc. then that scholarship will be considered taxable. Since the things you’re using the money for is not directly related to your college education itself, it plays by different rules.
If you are still uncertain whether or not a certain scholarship is taxable, ask the scholarship provider or your college’s financial aid office for more detailed information on that specific award. Different scholarships will have different requirements.
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