Your scholarship or fellowship grant can still qualify as tax free even if the terms do not provide that it be used only for tuition and course-related expenses. It will qualify if you use the grant proceeds for tuition and course-related expenses. However, if the terms of the grant require its use for other purposes, such as room and board, or specify that the grant cannot be used for tuition or course-related expenses, the amounts received under the grant are not tax free. You can use Table 2 to figure the tax-free and taxable parts of your scholarship or fellowship. Scholarship and Fellowship Income Worksheet Athletic scholarships.
Athletic scholarships are tax free if they meet the requirements discussed above.
A Fulbright grant is generally treated as any other scholarship or fellowship in figuring how much of the grant is tax free. If you receive a Fulbright grant for lecturing or teaching, it is payment for services and is taxable. A special rule applies if the grant was paid in nonconvertible foreign currency. See Payment of Tax by Fulbright Grantees under Individuals Abroad, later. A Fulbright grant is a grant under the Mutual Educational and Cultural Exchange Act of 1961, known as the Fulbright-Hays Act.