Scholarships are a desirable type of financial aid because they don’t have to be paid back like student loans do. But do scholarships represent potentially taxable income? Some do, while others don’t.

Always check with a tax professional – but generally, a scholarship may be tax free if:

• The student is a “candidate for a degree.” The term is defined broadly. Students attending primary and secondary schools can qualify, as can students pursuing degrees at colleges or universities or attending certain occupational training or continuing education programs.
• The money is used for tuition or required course related fees, books, supplies and equipment. Money spent for room, board, travel and other expenses is taxable.
• The money is not payment for past, present or future teaching, research or other services.

It is also possible for part of the scholarship to be taxable and the rest tax free.