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Scholarships, Fellowships, and Training Grants

Directive Statement

The university must appropriately classify, tax, and report awarded student scholarship, fellowship grants and other financial aid.

Reason for Directive

The purpose of this directive is to ensure compliance with IRS regulations regarding taxation of student-related income, including scholarships, fellowships, and training grants.

Who must comply?

All university departments.

Overview

Scholarships, fellowship grants, and other grants are tax-free if you meet the following conditions:

  1. You are a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
  2. The amounts you receive are used to pay for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution

A scholarship or fellowship is tax free only to the extent:

  1. It doesn’t exceed your qualified education expenses;
  2. It isn’t designated or earmarked for other purposes (such as room and board), and doesn’t require (by its terms) that it can’t be used for qualified education expenses; and
  3. It doesn’t represent payment for teaching, research, or other services required as a condition for receiving it (But for exceptions, see Payment for services in Publication 970, Tax Benefits for Education)

If all or part of a scholarship or fellowship grant is taxable, the recipient may need to make estimated tax payments to the IRS on this additional income.  Estimated tax payments may be made through the Electronic Federal Tax Payment System (EFTPS).

Definitions

Scholarship

A scholarship is generally an amount paid or allowed to a student at an educational institution for the purpose of study and does not require repayment or the performance of present or future services (primarily for the benefit of the grantor) to receive it.  UF reports scholarship income in box 5 of Form 1098-T to both the recipient and the IRS at year end.

Fellowship (non-Training Grant)

A fellowship grant is generally an amount paid or allowed to an individual for the purpose of study or research and does not require repayment or the performance of present or future services (primarily for the benefit of the grantor) to receive it.  UF reports non-training grant fellowship income in Box 5 of Form 1098-T to both the recipient and the IRS at year end.

Training Grant

A training grant is a fellowship awarded at UF for the purpose of the individual’s research or training experience and does not require repayment or the performance of present or future services (primarily for the benefit of the grantor) to receive it.  UF reports training grant income in Box 3 of Form 1099-MISC to both the recipient and the IRS at year end.

Last Reviewed

05/01/2020: reviewed content

Resources

IRS Tax Information for Students

IRS Pub 970

Student Financial Affairs: Types of Aid

Electronic Federal Tax Payment System

Contacts

Tax Services: (352) 294-7266