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Education Tax Credits and Scholarship/Fellowship Taxability

  • NOTE:  The tax implications of education expenses vary significantly depending on the particular circumstances of each student.  The University strongly encourages students and parents to consult with a qualified tax advisor and to refer to official IRS publications for information about 1098-t formseducation credits and other tax benefits for education. In all cases, when claiming a tax credit or deduction, the taxpayer's financial records serve as the official supporting documentation for calculating the amount being claimed.

A scholarship or fellowship received by a degree candidate at an accredited institution will be considered a "qualified scholarship" and not taxable income to the student if it is used for "qualified expenses." Qualified expenses include tuition and any fees, books, supplies, and equipment required of all students in the course. .A scholarship or fellowship used for expenses other than qualified expenses is considered to be taxable income by the IRS.

Taxable scholarships are generally referred to as stipends and are payments for which no services are rendered or required. Examples of stipends are payments that can be used for living and incidental expenses such as room and board, travel, non-required books and personal computers, etc.

If the University will receive more than an incidental benefit from the student, the payments are compensation for services performed which are subject to federal and state income tax withholding, and may be subject to FICA.