Scholarships and Fellowships

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A scholarship is generally an amount paid to, or for the benefit of, a student at an educational institution to aid in the pursuit of studies.  The student may be either an undergraduate or a graduate. 

A fellowship is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research. 

 

 

For additional information on the definition of scholarships and fellowship, please visit the IRS website.

Generally, whether the amount is tax free or taxable depends on the expense paid with the funds and whether you are a degree candidate.   Reminder:  Scholarship and Fellowship taxable income is not consider "earned income" for purposes of contributing to an IRA.  It is considered compensation only if it is reported in box 1 of a Form W-2.

According to the Duke Employee Travel and Reimbursement office, funds received from ETR and used for Duke Business are generally not taxable.  If they are used for independent research they are generally considered taxable.  

For Degree candidates, in general, those portions of a scholarship, fellowship, or grant used to pay qualified education expenses are classified as a "Qualified Scholarship" and are not includible in the gross income of the recipient under Internal Revenue Code section 117. Any portion of the scholarship, fellowship, or grant that does not pay for qualified education expenses is includible in the gross income of the recipient, which means that it is subject to withholding.

For non-degree candidates, the entire grant is includible in the gross income of the recipient and is subject to withholding. Research grants awarded to post-doctoral research scholars are entirely includible in the gross income of the nonresident alien recipient and, as such, are subject to withholding. However, certain deductions related to the research may be allowable against the gross income.

Four steps to reporting your scholarship and fellowship income:

     1. Add up how much scholarship and fellowship income you received.

     2. Determine how much you paid towards qualified educational expenses.

     3. Calculate the taxable portion of your scholarship and fellowship income.

     4. Report the income and educational expenses on your tax return

 

 

 

IMPORTANT NOTE:  The information provided to you on this page is limited in scope and should not be your only resource for completing your tax returns.   We recommend you seek advice from a licensed tax professional.