Question

Patra is a degree candidate at her local state college. She received a scholarship for $5,000. She applied the amount to her tuition, which totaled $9,000. How much, if any, of the scholarship is taxable income?

Answer 1

$0.00 is taxable.

Reason: Under IRS rules (Pub. 970), scholarship amounts used to pay qualified education expenses — tuition and fees required for enrollment and course‑related books, supplies, and equipment — are excluded from gross income. Patra applied the $5,000 scholarship to her $9,000 tuition, so the entire $5,000 is nontaxable. (Only any portion used for nonqualified items such as room and board or paid as compensation for services would be taxable.)