Below are the reasons that a scholarship would be taxable:
If the scholarship is used to pay for any of these, it counts as income and the amount paid is taxable:
- Room and board
- Travel and incidental expenses
- Any fees, books, and supplies or equipment that are not required for your courses
If the student is getting a degree at an eligible school, the 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
For example, if the scholarship was used to pay for tuition and room and board, you would be taxed on the room and board payment but not tuition.
Plus see more information on entering a 1098-T form:
