FINANCIAL AID POLICIES HANDBOOK 2013-2014
Taxability of Scholarships and Grants
Due to the Tax Reform Act of 1986 (Public Law 99-514), scholarships and grants received in a calendar (as opposed to academic) year by a student in excess of tuition and books (including required equipment and supplies) for that calendar year are subject to federal income tax. The excess amount needs to be reported as income. Student loans are not covered by these provisions of the tax law. Earnings from student employment are taxable as wages. Since students are required to report taxable awards to the IRS as income, they should keep a detailed record of their expenses. Housing and food are considered non-exempt, so scholarships and grants spent on these items are subject to income tax. The college is not responsible for notifying students of their taxable amounts of grants and scholarships (except for work-study earnings). We provide information and a worksheet to help students understand their obligations to report this information, but we cannot serve as a tax consultant or adviser.
For international students, the college is obligated by the Tax Reform Act of 1986 to withhold taxes from the scholarship amount that exceeds tuition and books or to a proportional amount of the federally allowed personal exemption. The college is required to issue a statement to each student indicating the amount withheld. This amount will be charged against the student’s account. International students will be expected to file United States income tax returns (Form 1040NR) with the Internal Revenue Service to recover the withheld payments. In some cases, tax treaties between the United States and other governments will limit any tax liability an international student may have. The student accounts and loans office can provide more detailed information.
For more detailed information concerning the taxability of scholarships and grants, students should review IRS Publication 970 Tax Benefits for Education, http://www.irs.gov, or consult a personal tax adviser.