Tax Implications for Student Receiving Scholarships, Fellowships or Traineeships
Tax Implications for Student Receiving Scholarships, Fellowships or TraineeshipsThis policy was created to provide general information regarding potential federal income tax liability to students receiving scholarships, fellowships or traineeships.
The taxability of scholarships/fellowships/traineeships is determined under provisions of the Internal Revenue Code. Any tax liability under this law is the responsibility of the student. Each scholarship, fellowship or traineeship recipient is responsible for determining how the tax law applies to his/her particular circumstances. The procedures provide general information about how federal income tax law applies to scholarships, fellowships and traineeships.
This policy applies to all colleges, schools, departments, and units of the Institute.
Scholarships, Fellowships, and Traineeships |
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Scholarships, Fellowships, and Traineeships for US Citizen or Resident Alien with No Services Required |
A student (US Citizen or Resident Alien) who receives a scholarship, fellowship or traineeship award for which he/she is not required to perform services (past, present, or future) may exempt from income taxation the portion of the award that is used for qualified tuition and related expenses (tuition, fees, books, supplies, and other equipment required for courses). Any portion of the award used for other expenses, such as room and board or travel, is considered part of the student's gross income and must be reported on his/her individual tax return. Because the student has no employment relationship with the Georgia Institute of Technology (the Institute), the Institute is not required to withhold taxes on the taxable portion of the award and has no tax reporting obligation to the Internal Revenue Service (IRS) or the student. Please note that the Institute’s Bursar’s Office is required to report scholarships, fellowships and traineeships to the IRS and to the student on Form 1098-T, Tuition Statement. Form 1098-T is primarily intended to help a student or his/her parents claim an education credit, such as the American Opportunity Credit, based upon qualified tuition and related expenses that are not paid by scholarship, fellowship or traineeship. See the Bursar’s website listed in Section 7 below for more detailed information about education tax credits.
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Scholarships, Fellowships, and Traineeships for a US Citizen or Resident Alien with Stipulations on Expenses |
A student who receives a scholarship, fellowship or traineeship award in which the terms of the award state that a certain amount cannot be used for tuition, fees, books, supplies or required equipment for his/her courses (i.e. a certain amount must be used for room, board or anything other than tuition, books supplies or equipment) is responsible for reporting that amount as gross income on his/her individual tax return. Again, because the student has no employment relationship with the Institute, the Institute is not required to withhold taxes on the taxable portion of the award and has no tax reporting obligation to the IRS or the student.
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Scholarships, Fellowships, and Traineeships for Non-Resident Aliens |
The tax rules applicable to scholarship, fellowship and traineeship awards made to nonresident alien students differ from those applicable to students who are US citizens or resident aliens. The portion of the award that is used for qualified tuition and related expenses is exempt from US tax and is not reportable to the IRS. The remaining portion of the award is subject to tax and is considered part of the student's gross income and must be reported on form 1042-S and on his/her individual tax return. The Institute will withhold tax at the rate of 14% on this taxable portion unless the award is exempt under a tax treaty between the US and the student's home country. The student must supply the Institute with IRS Form 8233 in order to claim the benefit of a tax treaty. |
5.1.Student
The student is responsible for determining if he/she is required to file an individual income tax return with the Internal Revenue Service . The portion of a scholarship/fellowship/traineeship award that is used to pay qualified tuition and related expenses is not subject to tax. For more information related to the responsibility of the student in determining his/her tax liability, please visit the Office of Scholarships and Financial Aid website listed in Section 7 below.
5.2. Institute
The Institute is responsible for issuing a Form 1098-T, Tuition Statement, to a U.S. citizen or resident alien student and to the IRS to report any scholarship, fellowship or traineeship received during the calendar year and to report qualified tuition and related expenses paid during the calendar year not to exceed what was charged for qualified tuition and related expenses during the calendar year. The Institute is not required to issue a Form 1098-T to a nonresident alien student unless the student requests it.
The Institute is responsible for issuing a Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, to a nonresident alien student to report any scholarship, fellowship and traineeship even if no withholding is required because of a tax treaty between the U.S. and the student’s home country. Scholarship, fellowship, and traineeship amounts that do not exceed the student’s qualified tuition and related expenses are not required to be reported.
The Institute is responsible for issuing a Form W-2, Wage and Tax Statement, to any U.S. citizen, resident alien, or nonresident alien student to the extent the student receives a scholarship, fellowship or traineeship in exchange for the performance of services. The Institute is also responsible for issuing a W-2 to any student who receives compensation (other than a scholarship, fellowship or traineeship) in exchange for services.
To report suspected instances of ethical violations, please visit Georgia Tech’s Ethics Hotline, a secure and confidential reporting system, at: https://secure.ethicspoint.com/domain/en/report_custom.asp?clientid=7508
| Revision Date | Author | Description |
|---|---|---|
| 1-10-2023 | Controller's Office and Bursar and Treasury Services Office | Policy owner and contact changed to Bursar and Treasury Services Office. |
| 1-07-2021 | Controller's Office | Updates to verbiage. |
| 10-03-2014 | Controller’s Office | Updates to verbiage. Removed obsolete portions. Updated title. |