This is the sixth part of our multi-part series of blogs on tax benefits for education. Any present or former student should utilize the knowledge, experience and expertise of the tax professionals at the Thorgood Law Firm to ensure that they take advantage of all the credits and deductions that the law allows for students of higher education.
Scholarships and Fellowships
A scholarship is generally an amount paid or allowed for the benefit of undergraduate or graduate students to aid the pursuit of their studies at an educational institution. In contrast, a fellowship is typically an amount paid for the benefit of individuals to aid in their pursuit of research or other studious endeavor. The tax consequences of both a scholarship and fellowship depend on the expense paid with the amount and whether the student is a degree candidate.
A scholarship or fellowship is tax free only if the following conditions are met:
- The student-taxpayer is a degree candidate at an eligible educational institution.
- The scholarship or fellowship is used to pay qualified education expenses.
Qualified Education Expenses
For purposes of tax-free scholarships and fellowships, the following are qualified education expenses:
- Tuition and enrollment fees to attend an eligible educational institution.
- Expenses for fees, books, supplies, and equipment required for courses at an eligible educational institution. These expenses must not only be course-related but for items that are required of all students in that particular course of instruction.
Student-taxpayers must note that the terms of the scholarship or fellowship may not require that it be used for other purposes, such as room and board, or specify that it may not be used for tuition or other course-related expenses, in order to constitute qualified education expenses.
Expenses that Don’t Qualify
Qualified education expenses do not include the cost of:
- Room and board.
- Travel.
- Research.
- Clerical help.
- Equipment and other expenses not required for enrollment in or attendance at an eligible educational institution.
If you or a relative are currently enrolled in college and have questions about education credits and deductions, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation, call 212-490-0704.
