A scholarship generally is an amount paid for the benefit of a student at an educational institution to aid in the pursuit of studies. The student may be in either a graduate or an undergraduate program. All or part of a scholarship may be taxable to students, even if they did not receive a Form 1099.
The entire amount is taxable if the student is not a candidate for a degree.
Students who are candidates for a degree generally can exclude from income that part of a scholarship used for: 1) tuition and fees required for enrollment or attendance, and 2) fees, books, supplies, and equipment required for courses. In addition, the money must not have been in payment for services.
You cannot exclude from income any part of the scholarship used for other purposes, such as room and board.
See tax topic 421 and Internal Revenue Service publication 970 at www.irs.gov .
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