Are scholarships taxable in New Jersey?

[SweetieJean · Accepted solution]

Scholarships and Fellowship Grants are taxable unless they meet all of the following conditions: 

1. The primary purpose of the grant is to further the recipient’s education or training; and

2. The grant does not represent payments for past, present, or future services or payments for services that are subject to the direction or supervision of the grantor (e.g., a fellowship given in exchange for teaching); and

3. The grant is not for the benefit of the grantor.

http://www.state.nj.us/treasury/taxation/pdf/current/1040i.pdf at page 26.

[brerabbit1]

So does that mean I simply don't report what falls within those guidelines?

[PSP]

what does this mean?

"The primary purpose of the grant is to further the recipient's education or training."

My son received a scholarship that is enough to cover tuition and room and board, is that latter part taxable?

[CatinaT1]

It sounds like it is non-taxable then.  What are you referring to when you say 'is the latter part taxable?'

[PSP]

Thanks for replying.

For example, my child received a scholarship from a NJ state university that is enough to cover all IRS qualified ed expenses ( i.e., tuition, fees, books, etc.) as well as sufficient to cover room and board. The IRS says the amount not considered a qualified expense (e.g., the amount used for room and board) is taxable.  Does NJ do the same (i.e., part would be taxable) or since it is one scholarship only given so he would attend the school for educational purposes, is it all tax exempt?

[JotikaT2]

Yes.

New Jersey does not taxable scholarship income if it was used for education.  Any other amounts are taxable, including amounts paid for room and board.

See the excerpt from New Jersey below.

[Hal_Al]

It's taxable.

I asked that question at the New Jersey Division of Taxation web site. It took 2-1/2 months to get an answer, but here it is.

Question

The instructions say Scholarships  are not taxable if the  primary purpose of the grant is "to further the recipient's education or training." Room and board are not "qualified expenses" on the federal return.  Are scholarships that pay for room and board taxable on the NJ return or does room & board expenses meet the definition of "to further the recipient's education or training"?

Answer

"A qualified scholarship is fully exempt from New Jersey Gross Income Tax and withholdings under N.J.S.A. 54A: 6-8. Generally, tuition, fees, books, supplies and equipment are excluded for New Jersey purposes.

However, additional compensation (amounts for general living expenses such as room, board, travel, etc.) paid in excess of tuition and the related expenses as mentioned above are included in income and not tax exempt."