The Internal Revenue Service does not exempt college students from their income tax liabilities. If you have scholarships that assist you with your college costs, you need to know how to report that income on your income taxes so that you can avoid additional penalties from the IRS. If you are not a degree candidate, you must report all of your scholarships as taxable income. If you are a degree candidate, you must report the amount of your scholarships that exceeds the cost of your qualified expenses.
Contact your financial aid office to find out the cost of tuition and fees charged by the school. These costs vary by school and by year. Room and board, transportation and other non-required fees do not count. In Publication 970, the IRS defines required fees as "course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. These items must be required of all students in your course of instruction."
Subtract the total cost of your qualified expenses from your total scholarship amount. If the scholarship is less than your expenses, none of it is taxable. For example, if you have $21,500 in scholarships and only $19,900 in qualified expenses, you would have to report $1,600 in scholarship income.
Report the amount of your scholarship income, along with any other earned income on the appropriate line of your tax form. For Form 1040EZ, write the amount on line 1. For Forms 1040 and 1040A, write the amount on line 7. For all forms, if you did not receive a W-2 form form your scholarship, write "SCH" and the amount next to the line on which you reported the income.
- Internal Revenue Service: Publication 970
- Internal Revenue Service. "What Is an Eligible Educational Institution?" Accessed Oct. 17, 2019.
- National Scholarship Providers Association. "Guide to the Tax Treatment of Scholarships," Page 1. Accessed Oct. 17, 2019.
- Internal Revenue Service. "Topic No. 421 Scholarships, Fellow Grants, and Other Grants." Accessed Oct. 17, 2019.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."