If you’re currently evaluating financial aid awards for your college-bound child, it’s important to understand what types of assistance are taxable. In general, free-money scholarships, fellowships, grants and tuition “discounts” are nontaxable. However, they must be used according to their designations — for example, for tuition, books and educational materials. Work-study compensation (even if referred to as “scholarships” or “fellowships”), on the other hand, must be reported on the student’s federal income tax return. But, depending on total income and other factors, your child may not owe tax on these amounts. Contact us for advice on paying for college.
