Scholarships and fellowships do not include amounts which represent payments for:
- Teaching,
- Research that does not primarily benefit a student’s academic program/educational goals, or
- Any other service (past, present, or future) for or on behalf of the University.
The nature of payment in these cases is compensation.
Scholarships
A scholarship is generally an amount paid or allowed to, or for the benefit of a student at an educational institution to aid in the pursuit of studies. The student may be either an undergraduate or a graduate.
Fellowships
A fellowship is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research.
A Postdoctoral Fellow is an individual holding a doctoral degree who is engaged in a temporary period of mentored research and/or scholarly training for the purpose of acquiring the professional skills needed to pursue a career path of his or her choosing.
Qualified and Non-Qualified Expenses
Scholarships/fellowships are qualified and non-taxable income if:
- Amounts are used for qualified education expenses, which are:
- Tuition and fees required for the enrollment or attendance at an educational institution
- Fees, books, supplies, and equipment required for courses of instruction
- Amounts are received by a candidate for degree, and
- Amounts are awarded to study at an educational institution.
Scholarships/fellowships are non-qualified and taxable income if:
- Amounts exceed qualified education expenses (as defined above); or
- Amounts are designated or earmarked for other purposes (such as room and board), and/or are required (by the terms) to not be used for qualified education expenses; or
- Amounts represent support of research or other services that primarily assist in the educational goals of the student. Payments cannot be for services required to be performed for the University. (See chart of examples of Compensatory and Scholarship/Fellowship payments)
Tax Withholding and Reporting Obligations for Scholarships/Fellowships:
Nonresident Alien for Tax Purposes
University Withholding Obligation
If the recipient is a nonresident alien for tax purposes, the University has the following withholding obligation on non-qualified scholarship/fellowship payments:
- Nonresident aliens holding a student visa type are subject to default tax withholding of 14%; or
- Nonresident aliens under other immigration statuses are subject to default tax withholding of 30%.
If an applicable income tax treaty is identified, claimed, and documented to reduce or eliminate the University’s tax withholding obligation, the aforementioned withholding rates may differ.
University Reporting Obligation
The University will report scholarship/fellowship payments and tax withholding for the calendar year on IRS Form 1042-S.
Resident Alien for Tax Purposes, Permanent Resident or US Citizen
University Withholding Obligation
If the recipient is a resident alien for tax purposes, permanent resident, or US citizen, the University does not have a withholding obligation on scholarship/fellowship payments.
University Reporting Obligation
The University may report scholarship/fellowship payments on IRS Form 1098-T (Tuition Statement). If the recipient is a University student, they may receive an IRS Form 1098-T that reports both qualified and non-qualified scholarships posted to their student account during the calendar year. For more information regarding 1098-T, please refer to the Bursar’s Office.
NOTE: Form 1098-T may not include all non-qualified scholarship payments. However, the payments are still taxable to the recipient. It is the recipient’s responsibility to report non-qualified scholarships/fellowships on their individual income tax return.