• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

The College Investor

Student Loans, Investing, Building Wealth

  • About
  • Podcast
  • Research
  • Contact
  • Save For College
      • How To Start

      • How To Save For College
      • How To Pay For College
      • What Is the Average Cost of College?
      • What Is A 529 Plan and Where to Open One in Your State
      • How Much Should You Have In A 529 Plan By Age
      • How To Use A 529 Plan For Private Elementary And High School
      • What Are Qualified Expenses For A 529 Plan (And What Doesn’t Count)?
      • The Best Brokers To Open A 529 Plan
      • Tools + Accounts

      • 529 Plans: The Ultimate College Savings Plan
      • 529 Plan Contribution Limits
      • Prepaid Tuition Plans | What To Know
      • Understanding And Using 529A ABLE Accounts
      • Using A Roth IRA To Save And Pay For College
      • FAFSA Deadlines for Financial Aid
      • CollegeBacker Review
      • Upromise Review
      • UNest Review
      • Other Options

      • Student Loan And Financial Aid Programs By State
      • The Guide To Military And VA Education Benefits
      • How To Fill Out The FAFSA
      • How To Find College Scholarships
      • The Best College Scholarship Search Websites
      • How To Find Grants To Pay For College
      • Pell Grants: What They Are And How To Qualify
      • Understanding Federal Work-Study
      • How To Use A 529 Plan If Your Child Doesn’t Go To College
  • Student Loans
      • Borrowing

        • How Student Loans Work
        • How To Apply For A Student Loan
        • How To Find The Best Student Loans And Rates
        • Best Private Student Loans Of May 2022
        • Best Student Loans To Pay For Graduate School
        • Best Student Loans To Pay For Medical School
        • Parent Loans To Pay For College
        • No-Cosigner Student Loan Options
        • Guide To Income Sharing Agreements (ISAs)
        • Best International Student Loans
      • Get Out Of Debt

        • Best Places To Refinance Student Loans In May 2022
        • Best Student Loan Repayment Plans
        • Best Student Loan Refinancing Bonuses And Promotional Offers
        • Student Loan Forgiveness Programs (The Complete List)
        • The Full List Of Student Loan Forgiveness Programs By State
        • Public Service Loan Forgiveness (PSLF)
        • Top Student Loan Scams
        • Average Student Loan Monthly Payment
        • Average Student Loan Debt By Year
      • Reviews

        • Credible Review
        • Splash Review
        • Ascent Review
        • Citizens Bank Review
        • Commonbond Review
        • Earnest Review
        • ELFI Review
        • Laurel Road Review
        • LendKey Review
        • SoFi Review
  • Investing
      • How To Start

        • How To Start Investing in High School
        • How To Start Investing In College
        • How To Start Investing In Your Twenties For 22 – 29 Year Olds
        • How To Start Investing In Your 30s For 30 – 39 Year Olds
        • How To Start Investing With $100 Or Less
        • How To Give Kids The Gift Of Stock
        • What Is Dividend Growth Investing
        • IRA Rollover Chart
      • Tools + Accounts

        • Best Online Stock Brokers
        • The Best Traditional And Roth IRA Accounts
        • The Best Robo-Advisors
        • The Best Investing Apps
        • The Best Places to Trade Options
        • The Best Places To Open A Health Savings Account
        • The Best Solo 401k Providers
        • The Best Self-Directed IRA Providers
        • Best Cryptocurrency Exchanges
      • Reviews

        • Vanguard Review
        • Fidelity Review 2022: Still One Of The Best Online Brokers
        • M1 Finance Review
        • TD Ameritrade Review
        • Charles Schwab Review
        • Robinhood Review
        • Webull Review
        • Betterment Review
        • Wealthfront Review
  • Earn More Money
      • Extra Income

        • 15 Best Side Hustles You Can Start Earning With Now
        • Side Hustle Ideas: 50+ Ways To Make Money Fast
        • 100+ Real And Honest Ways To Make Money In College
        • 80 Ways To Make Money From Home (In Your Pajamas)
        • 5 Quick Money Making Ideas (That Take Less Than 1 Hour)
        • 10 Interesting Ways You Can Make Money Driving
        • High-Paying Side Gigs That Earn $1,000 or More Per Month
        • The 10 Best Money-Making Apps
        • Paid Surveys: Earn Money For Giving Your Opinion Online
        • 10 Crazy Ways To Make $10,000 You’ve Never Heard Of
      • Build Wealth

        • 35 Passive Income Ideas You Can Use to Build Real Wealth
        • 3 Ways To Make $50,000 Per Year Without Working With Passive Income
        • How To Become A Real Estate Investor With Just $500
        • 15 Best Online Business Ideas
        • How to Create Streams of Passive Income on a Limited Budget
        • Residual Income: 7 Super Smart Ways to Build It
        • The Most Common Multiple Income Streams
        • How To Become A Real Estate Mogul With Only $10,000
      • Reviews

        • Fundrise Review
        • RealtyMogul Review
        • FarmTogether Review
        • AcreTrader Review
        • Swagbucks Review
        • Survey Junkie Review
        • TopCashback Review
        • DoorDash Review
  • Personal Finance
      • Banking

        • Best High Yield Savings Accounts Of May 2022
        • Best Money Market Accounts Of May 2022
        • 10 Best Free Checking Accounts In May 2022
        • The Best Bank CD Rates Of May 2022
        • 10 Best Business Checking Accounts In May 2022
        • The Best Online Banks Of May 2022
        • 5 Best Credit Unions Nationwide of May 2022
        • Best College Student Checking Accounts In May 2022
      • Insurance

        • Best Life Insurance Companies
        • Renters Insurance
        • Car Insurance
        • Pet Insurance
        • Umbrella Insurance
        • Disability Insurance
        • Tuition Insurance
        • Travel Insurance
      • Credit Tools

        • Best Budgeting Apps
        • Cash Advance Apps
        • How To Get A Free Credit Score Report
        • The Best Credit Monitoring Services
        • Debt Settlement: Inside The Secret World
        • Credit Repair Explained: Should You Pay For Help?
        • Best Personal Loan Companies And Lenders
        • Online Loan Companies To Borrow From Home
      • Tax

        • Best Tax Software
        • Free Tax Software
        • IRS Tax Refund Calendar
        • Common IRS Questions and Errors
        • Federal Tax Brackets
        • Capital Gains Tax Brackets
        • 401k Contribution Limits
        • IRA Contribution Limits
        • HSA Contribution Limits
  • Forum
  • Search
Home » Taxes » How Scholarships And Grants Affect Your Taxes

How Scholarships And Grants Affect Your Taxes

Updated: February 11, 2020 By Zina Kumok

Tweet
Share
Share
Pin
Email

At The College Investor, we want to help you navigate your finances. To do this, many or all of the products featured here may be from our partners. This doesn’t influence our evaluations or reviews. Our opinions are our own. Learn more here.Advertiser Disclosure

There are thousands of financial products and services out there, and we believe in helping you understand which is best for you, how it works, and will it actually help you achieve your financial goals. We're proud of our content and guidance, and the information we provide is objective, independent, and free.

But we do have to make money to pay our team and keep this website running! Our partners compensate us. TheCollegeInvestor.com has an advertising relationship with some or all of the offers included on this page, which may impact how, where, and in what order products and services may appear. The College Investor does not include all companies or offers available in the marketplace. And our partners can never pay us to guarantee favorable reviews (or even pay for a review of their product to begin with).

For more information and a complete list of our advertising partners, please check out our full Advertising Disclosure. TheCollegeInvestor.com strives to keep its information accurate and up to date. The information in our reviews could be different from what you find when visiting a financial institution, service provider or a specific product's website. All products and services are presented without warranty.

Grants Affect Your TaxesFor many people, tax time is one of the most complicated times of the year. April 15 is a busy time for accountants and tax preparers, but it’s also a stressful time for most people. If you’re a student, you might not know what to do – especially if you have scholarships and grants. Do scholarships and grants affect your taxes?

There’s not an easy answer to that question. If you earned scholarships and grants, you might owe taxes. But how can you be sure?

Read below to see what you need to know about how financial aid can affect you during tax time and how you can be prepared.

What Students Should Know About Scholarships, Grants, And Taxes

There are three basic kinds of college-related aid: merit-based scholarships, grants determined by need and loans.

In general, money used to pay tuition costs directly doesn’t count as income, while other funds do. Student loans and Pell Grants never qualify as income, while other grants used for direct education expenses aren’t reported as income.

“Qualified expenses are specific to tuition, fees, books, and supplies required to matriculate,” said accountant Eric Nisall of Accountlancer. “It doesn’t include room and board, travel costs, anything that isn’t a requirement of enrollment.”

Some students qualify for work-study, which is often need-based. Work-study is considered to be a job, and any proceeds are reported as income. If you have any expenses directly related, you might be able to deduct them on your taxes.

Some schools award grants and scholarships that aren’t allowed to be used for qualified expenses; those must also be reported as income. Students must also be attending an accredited university to avoid having any grants and scholarships count as income.

If you receive more in scholarships than the cost of tuition and other qualified fees, you’ll have to report the difference on your taxes. Don’t worry. You’ll never owe more in taxes than you earn.

The IRS states that any money received “for teaching, research, or any other services required as a condition for receiving the scholarship” must be reported as income. If you worked as a TA for a professor, that income will count, but your department scholarship won’t.

Students worried about owing taxes should collect any related information throughout the year and reference that information when filing.

Still unsure? The IRS has a Q&A tool that will determine if the money you received counts as taxable income.

How Students Can File Their Taxes

Students needing to file their taxes can use the free versions of Turbotax, TaxAct or other tax programs. Filing taxes is simple for most college students, since they only have a couple forms to fill out. Your college might send you a 1098-T form that you’ll use to file your taxes.

You might also get a 1098-E for any student loan interest you paid.

A personal accountant can help, but is likely overkill for a simple return. Services like H&R Block can also handle tax returns, but they might charge too much for what could be a 30-minute process.

Make sure to have all your forms organized before you file your taxes. The deadline to send out tax forms was Jan. 31, but if you moved during the year or have your documents sent to your parent’s house, you might not have gotten everything.

Go over those forms to verify the information. It’s not uncommon to see the wrong social security number or a misplaced comma, so don’t take your tax forms as gospel.

If you’re still confused, contact your college’s financial aid office. Some community centers also offer tax prep if you can’t afford to hire someone.

Zina Kumok
Zina Kumok

Zina Kumok is a freelance writer specializing in personal finance. She has been featured in Lifehacker, DailyWorth and Time, and she paid off $28,000 worth of student loans in three years. She also works with people one-on-one as a money coach at ConsciousCoins.com.

Editorial Disclaimer: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, or other advertiser and have not been reviewed, approved or otherwise endorsed by any of these entities.
Comment Policy: We invite readers to respond with questions or comments. Comments may be held for moderation and are subject to approval. Comments are solely the opinions of their authors'. The responses in the comments below are not provided or commissioned by any advertiser. Responses have not been reviewed, approved or otherwise endorsed by any company. It is not anyone's responsibility to ensure all posts and/or questions are answered.
Subscribe
Connect with
I allow to create an account
When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings. We also get your email address to automatically create an account for you in our website. Once your account is created, you'll be logged-in to this account.
DisagreeAgree
Notify of
I allow to create an account
When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings. We also get your email address to automatically create an account for you in our website. Once your account is created, you'll be logged-in to this account.
DisagreeAgree
14 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments

Primary Sidebar

Robert Farrington

Hi! My Name is

America's Millennial Money Expert

Welcome to The College Investor. We're here to help you escape student loan debt so you can start investing and building wealth for the future

Our expert guides, reviews, and more are designed to help you achieve your financial goals.

Want to learn more? See what's in my wallet.

As Featured In

Social Media

Popular Posts

Side Hustling

Side Hustle Ideas: 50+ Ways To Make Money Fast

Best Side Hustles

15 Best Side Hustles You Can Start Earning With Now

Make Money From Home

80 Ways To Make Money From Home (In Your Pajamas)

Crazy Ways To Make $10,000

10 Crazy Ways To Make $10,000 You’ve Never Heard Of

Make $50,000 Per Year

3 Ways To Make $50,000 Per Year Without Working With Passive Income

Student Loan Scams

Top Student Loan Scams

Net Worth of Millennials

The Average Net Worth Of Millennials By Age

Ways To Get Student Loan Forgiveness

Student Loan Forgiveness Programs (The Complete List)

Passive Income Ideas

35 Passive Income Ideas You Can Use to Build Real Wealth

529 Plan By Age

How Much Should You Have In A 529 Plan By Age

Ultimate Guides

529 Plan Guide

529 Plans: The Ultimate Guide To College Savings Plans

Student Loans and Financial Aid By State

Student Loan And Financial Aid Programs By State

Student Loan Advice

The Definitive Guide To Student Loan Debt: Everything To Know About Your Loans

Student Loan Forgiveness By State

The Full List Of Student Loan Forgiveness Programs By State

newretirement

How to Start Saving Now: The College Graduate’s Guide to Saving for Retirement

Latest Research

Institutional Merit Grants

Who Gets Institutional Merit Grants At Private Colleges?

Resume Student Loan Payments

Survey: Even With Higher Expenses, Most Student Loan Borrowers Are Ready To Resume Payments

Support From Parents Survey

64% Of Millennials Receive Support From Their Parents

undermatching at selective colleges

Undermatching: Why Do Smart Low-Income Students Not Enroll In Selective Colleges?

How Much Americans Pay To File Their Taxes

How Much Americans Pay To File Their Taxes

Footer

Banking

  • 10 Best Free Checking Accounts In May 2022
  • The Best Online Banks Of May 2022
  • The Best Bank CD Rates Of May 2022
  • Best Money Market Accounts Of May 2022
  • Best High Yield Savings Accounts Of May 2022
  • Best High-Yield Checking Accounts Of May 2022
  • The Best Bank Bonus Offers
  • The Best Business Checking Accounts

Investing

  • Best Online Stock Brokers In 2022 (According To Readers)
  • Best Brokerage and Investing Bonus Offers In May 2022
  • The Best Places To Open An HSA (Health Savings Account)
  • 5 Best Investing Apps With Free Stock Trading
  • How To Buy Stocks Online For Free
  • The Best Robo-Advisors Of 2022
  • The Best Self-Directed IRA Providers
  • The Best Traditional And Roth IRA Accounts Of 2022
  • Comparing The Most Popular Solo 401k Options
  • Top 3 Automatic Investment Apps Of 2022

Student Loans

  • Best Places To Refinance Student Loans In May 2022
  • Best Private Student Loans Of May 2022
  • How To Find The Best Student Loans And Rates
  • Best Student Loan Refinancing Bonuses And Promotional Offers

Insurance

  • The Top 10 Online Life Insurance Companies
  • The Ultimate Guide To Renters Insurance – Everything You Need To Know
  • The Cheapest Car Insurance For College Students

Connect

  • Contact Us
  • Advertise
  • Press & Media

About

  • About
  • Our Team
  • Podcast
  • Editorial Guidelines
  • How We Make Money
  • Archives

Social

Copyright © 2022 · The College Investor · Privacy Policy ·Terms of Service · DO NOT Sell My Personal Information

wpDiscuz