Scholarship money is generally tax free provided you are a candidate for a degree at an eligible institution and use the money to pay for qualified expenses. The tuition and fees deduction has expired, but you may be eligible to deduct student loan interest from your taxable income.

How is a scholarship taxed?

Generally, you report any portion of a scholarship, a fellowship grant, or other grant that you must include in gross income as follows: If filing Form 1040 or Form 1040-SR, include the taxable portion in the total amount reported on the “Wages, salaries, tips” line of your tax return.

Do colleges report scholarships to the IRS?

There is no federal law or regulations that requires scholarship recipients to report their scholarships to the college financial aid office. There is a requirement to report the taxable portion of a scholarship to the IRS. The Internal Revenue Code of 1986 provides an exclusion from income for qualified scholarships.

Is the money from a college scholarship taxable?

First, the good news for your daughter is that scholarship money, for the most part, isn’t taxable because it isn’t considered income. The good news for you is that you still may be able to claim an education tax credit on your return as long as you pay qualified expenses above and beyond what your daughter’s scholarship covers.

Do you have to file a tax return if you get a scholarship?

If you do not receive a W-2, you are still required to report the taxable amount of your scholarship on your taxes. If your scholarship is tax-free and it is your only income for that tax year, you do not have to report it and you do not have to file a tax return.

What do you have to do to get a college scholarship?

The student must be a degree candidate at an eligible educational institution, which generally means an institution with a regular faculty and curriculum and a regularly enrolled body of students. The scholarship or fellowship money is used for qualified expenses.

Can a scholarship be used for living expenses?

If a scholarship, grant or fellowship is available for living expenses but not restricted to living expenses, the student can choose to use the money to pay for qualified tuition and related expenses, which would cause the money to be excluded from income.