- A scholarship is generally an amount paid or allowed to, or for the benefit of, a student at an educational institution to aid in the pursuit of studies. The student may be either an undergraduate or a graduate.
- A fellowship is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research.
- A Postdoctoral Fellow is an individual holding a doctoral degree who is engaged in a temporary period of mentored research and/or scholarly training for the purpose of acquiring the professional skills needed to pursue a career path of his or her choosing.
Scholarships and Fellowships do not include amounts which represent payments for teaching, research or other service (past, present or future) for or on behalf of the University. These payments are compensation.
Scholarships/Fellowships are qualified and non-taxable income if:
- Amounts are used for qualified education expenses, which are:
- Tuition and fees required for the enrollment or attendance at an educational institution
- Fees, books, supplies and equipment required for courses of instruction
- Received by a candidate for degree
- Awarded to study at an educational institution
Scholarships/Fellowships are non-qualified and taxable income if:
- Amounts exceed qualified education expenses (as defined above); or
- Amounts are designated or earmarked for other purposes (such as room and board), and/or are required (by the terms) to not be used for qualified education expenses; or
- Amounts representing support of research or other services that primarily assist in the educational goals of the student. Payments cannot be for services required to be performed for the University. (see Chart of examples of non-compensatory and compensatory payments)
Reporting and Tax Withholding Obligations for Scholarships/Fellowships:
- If the recipient is a nonresident alien for tax purposes, non-qualified scholarship/fellowship payments are subject to default tax withholding of 14% (for nonresident aliens holding a student visa type) or 30% (for nonresident aliens under other immigration status) and are reportable. The nonresident alien recipient will receive an IRS Form 1042-S reporting the payment and the tax withholding for the calendar year.
- If the recipient is a resident alien for tax purposes, permanent resident or US citizen, the University of Arizona will not report the non-qualified amounts paid to the recipient on IRS Form 1042-S or Form 1099-MISC, but may report on Form 1098-T (Tuition Statement).
- Form 1098-T may not include all non-qualified scholarship payments. However, the payments are still taxable to the recipient. It is the recipient’s responsibility to report non-qualified scholarships/fellowships on his/her individual income tax return.
- If the recipient is a UA student, he/she may receive an IRS Form 1098-T that reports both qualified and non-qualified scholarships posted to his/her student account during the calendar year. For more information regarding 1098-T, please refer to the Bursar’s Office.