Do I have to pay tax for this "Scholarship for Service" ?

Forum|Forum|4 years ago
May 10, 2021
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My son got the scholarship for service from a government organization, that means he got the scholarship now, but have to work for the same amount of years for the government after he graduates. The scholarship will be treated as loan for repayment if he will not work for the government when he graduates. Does he have to pay tax for this kind of scholarship?

ColeenD3

Tax-Free

If you receive a scholarship, a fellowship grant, or other grant, all or part of the amounts you receive may be tax-free. Scholarships, fellowship grants, and other grants are tax-free if you meet the following conditions:

You're a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
The amounts you receive are used to pay for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution.

Taxable

You must include in gross income:

Amounts used for incidental expenses, such as room and board, travel, and optional equipment.
Amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant. However, you don't need to include in gross income any amounts you receive for services that are required by the National Health Service Corps Scholarship Program, the Armed Forces Health Professions Scholarship and Financial Assistance Program, or a comprehensive student work-learning-service program (as defined in section 448(e) of the Higher Education Act of 1965) operated by a work college.