Getting scholarships and grants for higher education is fast becoming a necessity for many students due to rising costs of college education. More and more students are looking for scholarships and more scholarships are offered to students than ever before. Almost every student searching for a scholarship has a question in mind that is “are scholarships taxable?” This article provides some information about tax consequences of a scholarship.
The answer to the question “are scholarships taxable?” depends upon a number of different factors. The factors that affect the taxability are the type of scholarship, the awarding body, your citizenship, and what scholarship covers. All of the above factors will determine if your scholarship is considered as your income.
The type of scholarship is the first factor that affects taxability. Scholarships that are provided specifically to pursue a course or get education in a specific field or college are normally not taxable. The scholarships that require you to be enrolled on a part or full time course are also not taxable. Open scholarships which are paid directly in to your bank account or scholarships that does not attach any requirement as to enrollment in a course may be taxed.
Scholarships awarded by the government are always tax free; the question of taxability only arises when the scholarship provider is a private association or college, so if you are provided a scholarship by government you need not to worry about tax consequences.
Scholarships in all countries are awarded to citizens of the country or resident non citizens, as well as to international students. Your status in the country in which you get a scholarship affects the taxability. Normally scholarships paid to citizens are tax free and scholarships for non citizens or international students may be taxable either by the country you are studying in or your home country.
Scholarships that pay for the tuition fees, books, research and other educational expenses are generally not taxable. The scholarships that pay for room, food, laundry or any other part of living costs may be considered as your income in some countries and may be taxed. However, in cases where it is taxed, generally only part of scholarship that covers living costs will be taxed.
You can also contact your scholarship provider for information on taxability of your scholarship or you can contact any tax consultant in your area to discuss the taxability of scholarship you are being awarded.