When you attend college you may receive scholarships, fellowships or grants. You might also receive stipends to cover expenses, or for teaching, doing research, working on an apprenticeship or internship, or for other work. According to the IRS, scholarships, fellowships and grants are generally not subject to federal income tax if you are a candidate for a degree and the money is used to pay for tuition and fees, or for books and supplies that are required of all students in the course.
Money from scholarships, fellowships, and grants that you use to pay for room and board, travel, and other personal expenses would generally be subject to federal income tax. And payments you receive for services, including teaching and research, would generally be taxable, even if you must perform the services to receive a degree.
But the IRS points out two exceptions. The portion of a scholarship or fellowship you receive under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program that represents payment for teaching, research or other services is not taxable if you are a candidate for a degree and you use that part of the scholarship or fellowship to pay tuition or other qualified education expenses.
If your only income is the taxable portion of scholarships, fellowships or stipends, you should check the filing requirements to see if you have to file a tax return. You can find the filing requirements in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.
If you receive a W-2 reporting the income you received for performing teaching, research or other services and federal income tax was withheld from your pay, you may be able to obtain a refund by filing a tax return, even if you are not required to file.
The IRS reminds that if you are receiving a stipend that is taxable and the educational institution is not withholding federal income tax, you may need to make estimated income tax payments if you will owe tax for the year.
If you receive Form 1099-MISC to report payments to you for the services performed, you would report the income as self-employment income on Schedule C. In this case you would also have to file Schedule SE and pay self-employment tax if your net earnings for the year were $400 or more.
If you receive a stipend that you have to report as taxable income, you may be able to deduct your expenses. For example, if you receive a stipend for an internship, you may have travel expenses away from home, vehicle expenses, expenses for supplies, or others.
If you receive the stipend as wages and receive a W-2, your expenses would be deductible on Form 2106 or 2106-EZ as employee business expenses. In this case the expenses would only be deductible if you itemize deductions. If you receive a 1099 form for the stipend, the payment would be considered income from self-employment and you could report the related expenses on Schedule C.
As indicated on the FinAid website, colleges and universities are required to withhold taxes on taxable payments made to international students. But if you are an international student, the income you receive for teaching, research or other work you perform may be exempt from U.S. federal income tax under a tax treaty. You can find information on treaties by country in IRS Publication 901, U.S. Tax Treaties.
