Athletic and Other Scholarships

Most student-athletes and their families feel athletic scholarships are always tax-free.

However, this is not true.  

If your son or daughter were to receive an athletic scholarship in an amount that paid for tuition and fees, room/board, books/supplies, and miscellaneous expenses, two thirds of the scholarship would be TAXABLE to the student-athlete in the year the funds were received.

According to the IRS and Congress, an athletic scholarship is only tax-free when used to pay for QUALIFIED expenses that we just covered in this publication. 

These same rules apply to ANY scholarship that the student may receive which are used to pay educational expenses.

Taxable Scholarships/Grants and Fellowships

As I have just mentioned above, if the student were to use scholarship/grant or fellowship monies to pay for Non-Qualified expenses, the funds are taxable to the student in the year they are received.

Amounts used to pay for non-qualified expenses is taxable to the student, even if the expenses are fees that must be paid to the college or university as a condition of enrollment or attendance.  Examples of these fees are as follows:

• Student Activity Fees
• Parking Fees
• Library Fees, etc.

Scholarships/grants or fellowships that are used to pay for educational expenses that represent payments for PAST, PRESENT, or FUTURE teaching, research, or other services is taxable compensation to the student in the year it is received.