{"id":33696,"date":"2019-07-18T11:22:32","date_gmt":"2019-07-18T15:22:32","guid":{"rendered":"https:\/\/www.tun.com\/blog\/?p=33696"},"modified":"2024-07-02T15:05:05","modified_gmt":"2024-07-02T19:05:05","slug":"scholarships-taxes-how-to-not-create-taxable-income-to-the-scholarship-recipient","status":"publish","type":"post","link":"https:\/\/www.tun.com\/blog\/scholarships-taxes-how-to-not-create-taxable-income-to-the-scholarship-recipient\/","title":{"rendered":"Scholarships & Taxes \u2014 How to Not Create Taxable Income to the Scholarship Recipient"},"content":{"rendered":"\n

Across industries, scholarships are becoming a great marketing tool, which is even more powerful today<\/a> in a world where client acquisition is one Google search away. 
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Brands like Hyundai<\/a>, Coca Cola<\/a>, Staples, Dr. Pepper<\/a>, JP Morgan<\/a>, Hulu, and Taco Bell are using the power of brand scholarships to raise awareness of their brands and give back to the community at the same time. Many others, including law firms<\/a> and accounting firms<\/a> and their respective professional societies and organizations, are similarly harnessing the power of scholarships.\u00a0
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Scholarships are also a great recruiting tool<\/a> for companies, organizations, and governmental entities. 
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The added benefit, of course, is that scholarship sponsors are helping students (and their families) in the process. 
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And students need all the help they can get today. Student debt in the United States is higher than ever, having hit $1.6 trillion<\/a> in 2019. About 44 million Americans have student loan debt, with the average undergrad borrowing about $30,000<\/a>. 
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Scholarships thus create a win-win situation for both sponsors and students. 
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But, to maximize the benefit to students, sponsors must ensure that their scholarships do not result in taxable income to students.<\/p>\n\n\n\n

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Need help with your scholarship?<\/strong><\/h4>\n\n\n\n

The University Network is happy to help you. Just give us a call at (917) 397-2650<\/strong>, email us at sales@tun.com<\/strong>, or schedule a free consultation below:<\/p>\n\n\n\n

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Schedule a Co<\/span>nsultation<\/strong><\/a><\/div>\n<\/div>\n<\/div><\/div>\n\n\n\n
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Here\u2019s what sponsors need to know to avoid creating taxable income with their scholarship disbursements.
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  1. What makes a scholarship tax-free?<\/a>
  2. Are Scholarships taxable?<\/a>
  3. \u00a0When does a scholarship trigger taxable income?<\/a>
  4. 1. Recipient is not pursuing a degree<\/a>
  5. 2. Recipient is not attending an eligible educational institution<\/a>
  6. 3. Scholarship amounts exceed qualified educational expenses\u00a0<\/a>
  7. 4. Scholarship amounts are designated for purposes other than qualified education expenses<\/a>
  8. 5. The scholarship amounts represent payment for services<\/a>
  9. Conclusion<\/a><\/ol>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\n\n\n
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    What makes a scholarship tax-free?<\/strong><\/h2>\n\n\n\n

    The IRS defines<\/a> scholarship as \u201cgenerally an amount paid or allowed to, or for the benefit of, a student (whether an undergraduate or a graduate) at an educational institution to aid in the pursuit of his or her studies.\u201d 
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    Are Scholarships taxable?<\/h2>\n\n\n\n

    The short answer is no, but to be tax-free, a scholarship must meet the following conditions:<\/p>\n\n\n\n