In order for a scholarship to be considered tax-free, it must be used for purposes outlined below and you must be considered a full-time or part-time candidate for a degree at a primary, secondary or accredited post-secondary institution. These include:
• Scholarships that cover
tuition and fees to enroll in, or attend an educational institution.
• Scholarships that cover fees, books, supplies and equipment required for your courses.
Your scholarship is taxed if it is used to cover the following:
· Room and board,
· Clerical help, or
· Equipment and other expenses that are not required for enrollment in, or attendance at an, eligible educational institution.
Reporting Your Scholarship for Tax Purposes:
Whether you must report your scholarship, depends on whether you must file a return and whether any part of your scholarship is taxable.
If your only income is a completely tax-free scholarship, you do not have to file a tax return and no reporting is necessary. If all or part of your scholarship is taxable and you are required to file a tax return, report the taxable amount as explained
· If you are filing a 1040EZ form, print “SCH” and the taxable amount to the right of the words “W-2 form(s)” on line 1.
· For the 1040 or 1040A forms, write “SCH” and the taxable amount on the dotted line next to line 7 on the 1040 or in the space to the left of line 7 on the 1040A.
Note: You must report the taxable amount, whether or not you received a Form W-2.