Function

• Scholarships designated explicitly for paying higher education expenses do not count as taxable income if the funds are used to pay for tuition and required fees. If you use the money for room and board, you must include that portion as taxable income.
  
  

Requirements

• You must be enrolled as a degree-seeking candidate at a qualified institute of higher education in order for the scholarship award to be tax-free.
  
  

Warning

• Money awarded to you that requires you to perform services or that you receive for past services provided must be included as taxable income. However, the IRS makes exceptions for scholarships received under either The National Health Service Corps Scholarship Program or The Armed Forces Health Professions Scholarship and Financial Assistance Program.