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.
Note: Scholarships/Fellowships do not include amounts which represent payments for teaching, research or other service (past, present or future). These payments are compensation.
Qualified and Nonqualified Scholarship/Fellowship – nontaxable
Qualified scholarships/fellowships represent amounts used for qualified tuition and related expenses, which include:
(A) tuition and fees required for the enrollment or attendance of a student at the University of Arizona
(B) fees, books, supplies, and equipment required for courses of instruction at the University of Arizona
Qualified scholarships/fellowships are excluded from the recipient’s gross income (not taxable).
Nonqualified scholarships/fellowships are taxable income to the recipients
If the recipient is a nonresident alien for tax purposes, the nonqualified scholarship/fellowship payment is subject to tax withholding at 14% (for nonresident aliens under F and J status) or 30% (for nonresident aliens under other immigration status). 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 nonqualified scholarship for the recipient on IRS Form 1042-s or Form 1099. However, the payment is still taxable to the recipient. It is the recipient’s responsibility to report the nonqualified scholarship on his/her individual income tax return.
Note: If the recipient is a UA student, he/she may receive an IRS Form 1098-T (Tuition Statement) that reports both qualified and nonqualified scholarships posted to his/her student account during the calendar year. For more information regarding 1098-T, please refer to Bursar’s Office.