J-1
Tax Treatment of Scholarship and Fellowship Payments
A scholarship or fellowship is tax free (excludable from gross income) only if:
• You are a candidate for a degree at an eligible educational institution. You are a candidate for a degree if you
attend a primary or secondary school or are pursuing a degree at a college or university, or attend an educational
institution that oers a program of training to prepare students for gainful employment in a recognized occupation
and is authorized under federal or state law to provide such a program and is accredited by a nationally
recognized accreditation agency.
A scholarship or fellowship is tax free only to the extent:
• It doesn’t exceed your qualied education expenses;
• It isn’t designated or earmarked for other purposes (such as room and board), and doesn’t require (by its terms)
that it can’t be used for qualied education expenses; and
• It doesn’t represent payment for teaching, research, or other services required as a condition for receiving the
scholarship. (But for exceptions, see Payment for services in Publication 970, Tax Benets for Education.)
Use Worksheet 1–1 below to gure the amount of a scholarship or fellowship you can exclude from gross income.
Education Expenses
The following are qualied education expenses for the purposes of tax-free scholarships and fellowships:
• Tuition and fees required to enroll at or attend an eligible educational institution.
• 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.
Qualied education expenses don’t include the cost of:
• Room and board • Travel
• Research • Clerical help
• Equipment and other expenses not required for enrollment in or attendance at an eligible educational institution
Worksheet 1-1. Taxable Scholarship and Fellowship Income
1. Enter the total amount of any scholarship or fellowship grant for 2021. See Amount of
scholarship or fellowship grant in Publication 970.
• If you are a degree candidate at an eligible educational institution, go to line 2.
• If you aren’t a degree candidate at an eligible educational institution, stop here. The
entire amount is taxable. For information on how to report this amount on your tax
return, see Entering Other Compensation in TaxSlayer in Tab D.
1. ________________
2. Enter the amount from line 1 that was for teaching, research, or any other services
required as a condition for receiving the scholarship. Don’t include amounts received
for these items under the National Health Service Corps Scholarship Program, the
Armed Forces Health Professions Scholarship and Financial Assistance Program, or a
comprehensive student work-learning-service program (as dened in Section 448(e) of the
Higher Education Act of 1965) operated by a work college (as dened in that section).
2. ________________
3. Subtract line 2 from line 1 ................................................................................................... 3. ________________
4. Enter the amount from line 3 that your scholarship or fellowship grant required you to use
for other than qualied education expenses ........................................................................ 4. ________________
5. Subtract line 4 from line 3 ................................................................................................... 5. ________________
6. Enter the amount of your qualied education expenses ...................................................... 6. ________________
7. Enter the smaller of line 5 or line 6. This amount is the most you can exclude from your
gross income
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(the tax-free part of the scholarship or fellowship grant) ...............................
7. ________________
8. Subtract line 7 from line 5 ................................................................................................... 8. ________________
9. Taxable part. Add lines 2, 4, and 8. See Entering Other Compensation in TaxSlayer in
Tab D, for how to report this amount on your tax return ................................. 9. ________________
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However, a scholarship or fellowship grant isn’t treated as tax free to the extent the student includes it in gross income (the student may or may not be
required to le a tax return) for the year the scholarship or fellowship grant is received and either:
- The scholarship or fellowship grant (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualied
education expenses.
- The scholarship or fellowship grant (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualied
education expenses.
You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the
educational assistance in income in the year it is received. See Publication 970 for more information.
