Are scholarships, fellowships, and grants considered taxable income?

Generally speaking, scholarships, fellowships, and Pell grants are considered tax-free benefits if paid to an eligible student at an eligible institution.

A scholarship or grant is tax-free if you meet the following qualifications:

• You are a candidate for a degree at a primary or secondary school or are pursuing a degree at a college or university, and
• You use the scholarship, grant, or fellowship to pay qualified education expenses.
• You attend an accredited educational institution that is authorized to provide a program that is acceptable for full credit toward a bachelor’s or higher degree or a program training to prepare students for gainful employment in a recognized field.

For taxation purposes, federal assistance or Pell Grants are considered scholarships.

No. When you pay qualified education expenses with certain tax-free funds, you cannot get an education credit or deduction for those expenses.

You must reduce the qualified education expenses by the amount of any tax-free educational assistance, such as a scholarship or grant. TurboTax will guide you through this.