Is my child's scholarship taxable?

Question:  Is my child's scholarship taxable?

Answer:  Generally, scholarships are free from federal taxation.  Scholarships are tax free so long as they are for a student's tuition.  If the scholarship is for tuition and for other expenses, such as room and board, only that portion of the scholarship that applies to tuition is free from taxation.  You must determine what percentage of the scholarship was applied to tuition and what percentage was applied to other expenses.  Books, fees, and supplies are included in the IRS definition of tuition, so many scholarship proceeds that can be applied to these expenses are tax free.

Teaching and research stipends, a particularly common way to lower graduate school expenses, od not qualify as scholarships.  They must be reported as income and they are subject to federal tax.