No, you do not pay tax on the amount the Hazlewood paid for your tuition. Hazlewood Benefits are not to be taxed. Did you receive any tax forms (1098-T)? Are you referencing: The Hazlewood Act is a State of Texas benefit that provides qualified Veterans, spouses, and dependent children with an education benefit of up to 150 hours of tuition exemption, including most fee charges, at public institutions of higher education in Texas. This does NOT include living expenses, books, or supply fees? Enter your 1099-T as you see it.
Answer NO to the veterans benefits question, as the Hazelwood Act is a tuition remission thing, and not a payment to either the student or the school.