Are grants and fellowships taxable income?

If you are a candidate for a degree, the part of a scholarship or fellowship you use for qualified education expenses is generally tax-free. Qualified expenses are tuition and fees required for enrollment, and books, supplies, and equipment required for your courses.

This is why keeping tuition, fees, and required materials in their own categories is worth doing: it draws a clean line around the tax-free portion.

Money used for living costs such as rent, food, and travel is generally taxable, as is any amount paid to you as a stipend or as payment for services like teaching or research. If you are not a degree candidate, the whole award is usually taxable.

Unrestricted awards that are not paid for tuition, such as the MacArthur and Guggenheim fellowships, are generally taxable income.

Many fellowships pay you directly with no tax withheld. That does not make the money tax-free; it means you may owe the tax yourself and may need to pay it in estimated quarterly installments to avoid a penalty.

Setting aside a portion of each payment as it arrives, in a dedicated tax category, keeps you ready for filing time instead of scrambling for it.

Tracking your spending by category makes it straightforward to separate the tax-free education costs from the taxable living costs when you file, and to show your work if anyone asks. GrantJar keeps that breakdown for you and exports it in one click.