Scholarships & Fellowships – U.S. Citizens & Resident Aliens

Scholarships & Fellowships – U.S. Citizens & Resident Aliens

February 26, 2014

Definitions 

  • Scholarship – Generally an amount paid or allowed for the benefit of an undergraduate or graduate student, to aid in the pursuit of the student’s studies at an educational institution.
  • Fellowship – Generally an amount paid or allowed for the benefit of an individual to aid him or her in the pursuit of research or studies (IRS Treasury Regulation 1.117-3).
  • Degree Candidate – For tax purposes, degree candidates include students who are enrolled in an undergraduate or graduate degree program at a college or university, and students who are not pursuing a degree, but are merely attending an accredited educational institution which offers a bachelor’s or higher degree program (IRS Treasury Regulation 1.117-6(c)(4)).

Tax Treatment of Scholarships & Fellowships 

Payments for: 

Scholarship & Fellowship Payments to a Degree Candidate

Scholarship & Fellowship Payments to a Non-Degree Candidate

Qualified Education Expenses:

  • Tuition and fees.
  • Books, supplies, equipment and other course-related expenses required (not merely suggested) for the course (IRS Reg. Sec. 1.117-6(c)(2)).

Tax Treatment – Payments for qualified education expenses to a degree candidate are not taxable. 

UCLA Tax Reporting – No reporting is required.

 

Tax Treatment – No amount of the grant made to a non-degree candidate, including a post-doctoral fellow, is considered qualified. Therefore, the entire amount of the grant is taxable.

UCLA Tax Reporting – No reporting is required.

Recipient Tax Reporting – The full amount of the grant should be included in the recipient’s federal and state tax returns.

Nonqualified Expenses:

  • Room and board.
  • Travel, research, clerical help, equipment and other expenses not required for the course (IRS Reg. Sec. 1.117-6(c)(2)).

Tax Treatment – Payments for nonqualified expenses are taxable.

UCLA Tax Reporting – No reporting is required.

Recipient Tax Reporting – The recipient should include the amount of any nonqualified grants in his or her federal and state income tax returns.

See your Scholarship/ Fellowship/ Grant Report at URSA Online for information on any nonqualified amounts included in a grant.

Tax Treatment – No amount of the grant made to a non-degree candidate, including a post-doctoral fellow, is considered qualified. Therefore, the entire amount of the grant is taxable.

UCLA Tax Reporting – No reporting is required.

Recipient Tax Reporting – The full amount of the grant should be included in the recipient’s federal and state tax returns.

 

Compensation for services:

  • Any part of the scholarship or fellowship grant that is payment for teaching, research or other services, or which enables the recipient to pursue studies or research primarily for the benefit of the grantor.

Tax Treatment – Taxable as wages and subject to federal and state income tax withholding.

University Tax Reporting – Reportable on Form W-2.

Tax Treatment – Taxable as wages and subject to federal and state income tax withholding.

University Tax Reporting – Reportable on Form W-2.