It depends.
If you’re getting a degree at an eligible school, your scholarship is tax-free when used for:
- Tuition and fees
- Fees, books, supplies or equipment required for your courses
- Any scholarship or fellowship for services received under the National Health Services Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program
If you use your scholarship to pay for any of these, it counts as income and the amount paid is taxable:
- Room and board
- Travel
- Any fees, books, and supplies or equipment that are not required for your courses
It doesn’t represent payment for teaching, research, or other services required as a condition for receiving the scholarship. (But for exceptions, see Payment for services in Publication 970).
For example, if you used your scholarship to pay for tuition and room and board, you would be taxed on the room and board payment but not tuition.
