, Answering FAQ'sTurboTax Employee
Generally speaking, scholarships, fellowships, and Pell grants are considered tax-free benefits if paid to an eligible student at an eligible institution.
A scholarship or grant is tax-free if you meet the following qualifications:
- You are a candidate for a degree at a primary or secondary school or are pursuing a degree at a college or university,
- You use the scholarship, grant, or fellowship to pay qualified education expenses,
- You attend an accredited educational institution that is authorized to provide a program that is acceptable for full credit toward a bachelor’s or higher degree or a program training to prepare students for gainful employment in a recognized field.
For tax purposes, federal assistance or Pell Grants are considered scholarships.
Can I get a credit or deduction for education expenses that were paid with tax-free dollars?
No. When you pay qualified education expenses with certain tax-free funds, you cannot get an education credit or deduction for those expenses.
You must reduce the qualified education expenses by the amount of any tax-free educational assistance, such as a scholarship or grant. TurboTax will guide you through this.
Who can claim education credits is a typical question. See our article on Who Claims the Education Credit: Parent/Dependent/or Relative?.
Some other common questions: