Are College Scholarships Really Tax-Free?

Apr 1, 2026 | Tax & Accounting

Generally, scholarships received by degree candidates are tax-free to the extent they’re used for qualified tuition and related expenses. These include tuition, mandatory fees and required books, supplies and equipment. Amounts used for non-qualified expenses — such as room and board or travel — are taxable. If a scholarship requires the student to perform services, such as teaching or research, the portion paid for those services must be reported as income and is generally taxable. However, exceptions apply.

Any taxable portion of a scholarship must be reported on the student’s return. If it’s not attributable to payment for services, it might trigger the “kiddie tax,” meaning unearned income above a certain threshold is taxed at the parents’ tax rate. Understanding the rules is essential. Contact the office with questions.

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