TO: Students Receiving Scholarships and Fellowships
FROM: Stephen A. Kimata
SUBJECT: Taxability of Scholarships and Fellowships
This memorandum informs you of the possible tax implications of awards you received during the previous calendar year. Please note that tuition remissions will continue to be nontaxable and will not be reported as income to you. The 1986 Tax Reform Act rewrote Section 117 of the Internal Revenue Service (IRS) tax code to limit the exclusion of scholarships or fellowships from income to the amount used for the payment of tuition and "course required fees, books, supplies and equipment" (summarized as "course-related expenses"). Room and board are not defined as "course-related expenses". You should retain receipts for all deductible items. This provision will apply to all recipients regardless of sources of those funds. Other funds paid as a part of a scholarship or fellowship, such as stipends or living allowances, are taxable income. A description of the amount of scholarships to be reported as taxable is included in the instructions for line seven of IRS Form 1040.
The IRS has exempted universities from the requirements to file Form 1099 (statement of miscellaneous income) on scholarships and fellowships. Thus, while these funds may be taxable, you will not be receiving any notification from the University. The University is also not in a position to provide students with tax advice. You may want to consult the IRS or tax counsel as appropriate in the preparation of your income tax returns.