Scholarship and Fellowship Recipients General Tax Information
The following information is intended for University of San Francisco students (U.S. citizens and residents) who are recipients of a scholarship or fellowship grant. This information includes the general tax rules published by the Internal Revenue Service (IRS) regarding such grants and applies regardless of whether your award is funded by the University or by another source.
The University does not provide tax advice; for additional information, you should contact your personal tax advisor or consult the IRS publications referenced below.
Under IRS regulations, the term “scholarship or fellowship” includes grants, waivers, and other forms of gift aid, which typically do not need to be repaid by the recipient of the aid. In some cases, the scholarship or fellowship funds are paid directly to you, while in other cases they are credited to your University student account. Whether the scholarship or fellowship payment is paid to you directly or to the University on your behalf, for tax purposes, the payment is treated as made to you and is subject to the tax rules discussed below.
Is my scholarship or fellowship taxable? You do not have to pay taxes on a scholarship or fellowship to the extent the funds are used for required tuition, fees, books, supplies, equipment, or other mandatory fees for classes or enrollment. The amount of health insurance premiums you pay to the University in order to be enrolled is also considered a required fee. To the extent you use scholarship or fellowship funds to pay for these types of required fees and expenses, the funds should be excluded from your taxable income.
What portion of my scholarship of fellowship would be taxable? Any portion of a scholarship or fellowship used to pay for room and board, travel, moving, and other living expenses should be included in your taxable income for the year. Again, this would be the case regardless of how the funds were paid, i.e., directly to you or on your behalf. Therefore, you may have to pay income taxes on the amount of your scholarship or fellowship used for such expenses. For more information on the tax treatment of scholarships and fellowships, see IRS Publication 970, Tax Benefits for Education.
How will I be taxed on the portion of my scholarship or fellowship that is not tax-free? IRS regulations do not permit the University to withhold income taxes on the taxable portion of a scholarship or fellowship. Therefore, depending upon the taxable amount of your award, you may need to make estimated income tax payments prior to filing your tax return. For more information on the rules pertaining to estimated tax payments, see IRS Publication 505, Tax Withholding and Estimated Tax.
Am I required to maintain any records related to my scholarship or fellowship? Yes. Regardless of how the scholarship and fellowship funds are paid to you (i.e., either directly or on your behalf), you are required to maintain records showing that you used all or a portion of your scholarship or fellowship funds for qualifying (i.e., nontaxable) expenses. You should retain receipts and other documents that show the total amount of such expenses. You may also use your University online student billing records for this purpose. In addition, you may receive an annual tax statement from the University (see below).
FORM 1098-T,TUITION STATEMENT
The University is required to annually file a Form 1098-T information return with the IRS for most students. If a return is filed, the University must also provide a copy of the return to the student showing the information reported. Information reported on the Form 1098-T is intended to assist taxpayers in calculating the amount of the higher education tax credits or deductions they may be eligible to claim.
What information is reported on the Form 1098-T? Amounts are reported in Box 2 and Box 5 of the Form 1098-T. Box 2 represents the total Qualified Tuition and Related Expenses charged or billed to your student account for the calendar year. This amount could be different than what you actually paid for the year. Box 5 represents total Scholarships and Grants, including fellowships, from all known sources, that the University processed on your behalf. The total amount reported for these types of awards is without regard to whether any portion of an award may be taxable. You should make the determination regarding whether your scholarship or fellowship is taxable based upon your individual facts, irrespective of how the University may have applied your grant funds to the amounts you owed the University.
Are any educational loans I received reported on the 1098-T? No. Amounts reported on the Form 1098-T do not include any loans you may have received in connection with your enrollment at the University.
For more information about the education tax credits and deductions, see IRS Publication 970.