How to report stipend and scholarship income on your tax return
🎓 Do you have to pay taxes on scholarships in the U.S.?
If you’re an international student or J-1 visa holder, it’s essential to understand whether your scholarship or stipend income is taxable in the U.S.
Failing to report this income correctly could lead to penalties or even affect future visa applications — so here’s a complete guide to help you stay compliant.
💡 Do you have to pay taxes on scholarships?
Yes. International students and exchange visitors may have to pay tax on certain portions of their scholarships or grants.
It depends on how the funds are used:
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✅ Qualified expenses (tax-free): Tuition, fees, books, supplies, and equipment required for your courses.
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⚠️ Non-qualified expenses (taxable): Room and board, travel, insurance, medical fees, and personal expenses.
If part of your scholarship covers housing or living costs, that amount is taxable and must be reported to the IRS.
📚 What are qualified educational expenses?
Qualified expenses are directly related to your course and required by your school.
Examples include:
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Tuition and mandatory enrollment fees
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Books, materials, or equipment required for study
Optional or unrelated expenses do not qualify.
🏠 What are non-qualified expenses?
Expenses that do not count as qualified education expenses include:
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Room and board
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Transportation or travel
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Insurance and health fees
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Personal or family costs
For example, if you receive a $15,000 scholarship and use $6,000 for accommodation, that $6,000 is taxable income and must be reported.
⚠️ What happens if you don’t report taxable scholarships?
Not reporting taxable income can result in:
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IRS penalties and interest
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Issues with future financial aid eligibility
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Visa complications or denial of future U.S. entry
Accurate filing is essential to protect your record with the IRS and immigration authorities.
💰 Are stipends considered taxable income?
Yes. Stipends are typically taxable income but are not treated like regular wages.
They are often paid to cover living costs for students, interns, or researchers, and while they aren’t subject to Social Security and Medicare (FICA) taxes, they must still be reported on your tax return.
You’ll usually receive a Form 1042-S from your university or sponsor showing the amount and any tax withheld.
🧾 How to report scholarships and stipends on your tax return
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Gather your documents – Collect Forms 1042-S, W-2, or any other income forms.
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Separate taxable and non-taxable amounts – Identify which parts of your scholarship covered qualified vs. non-qualified expenses.
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Report correctly – Include the taxable portion on your Form 1040-NR (for nonresidents).
💡 Tip: If 30% tax was withheld on your scholarship, you may be due a refund when you file.
📉 How much tax is withheld on scholarships and stipends?
The standard withholding rate for nonresidents is 30%.
However, if you are on an F, J, M, or Q visa, this rate may be reduced to 14% (or lower) depending on the tax treaty between your home country and the U.S.
🌍 Can a tax treaty help reduce or eliminate taxes?
Yes. Tax treaties between the U.S. and many countries provide exemptions or lower rates for students and researchers.
For example:
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Under the U.S.–Spain tax treaty, J-1 students and researchers can be exempt from paying tax on scholarships and up to $5,000 in personal service income (for five years for students, two years for others).
Each country’s treaty terms vary, so check your eligibility before filing.
🧮 Need help filing your nonresident tax return?
Filing taxes as an international student or J-1 participant can be complicated — but we make it simple.
J1 Summer Tax Back helps you:
✅ File your federal tax return (Form 1040-NR) correctly
✅ Determine your residency status
✅ Apply any tax treaty benefits
✅ Report scholarships, stipends, and wages accurately
✅ Stay fully compliant with the IRS
🚀 Get started with your nonresident tax return today with J1 Summer Tax Back.
Stay compliant. Stay stress-free.