Scholarships & Fellowships
Scholarships
A scholarship is any funding paid to or for the benefit of a degree seeking student (undergraduate or graduate), to assist the pursuit of their studies. Scholarships are used to assist with paying for items such as tuition, fees, books, supplies, room, board, and travel. Scholarships can be taxable to the recipient.
Sourcing of Scholarship
To determine if a scholarship is subject to U.S. taxes one factor is to review the source of the scholarship. Scholarships that originate from sources outside of the United States generally considered “foreign sourced income” and not subject to U.S. taxation. Income that originates within the United States is considered “U.S. sourced income”, and subject to U.S. taxation. (*Please note there are always exceptions to the rule.)
Taxes
Per the Internal Revenue Service, scholarships are classified under two categories: “Qualified Scholarship” which are not subject to taxes and “Nonqualified Scholarships” which are taxable.
Qualified scholarships must meet the following criteria:
- The recipient must be a candidate for a degree at an educational institute
- The funding must be used to pay for tuition, fees, books, supplies, and equipment that are required for registered courses.
Nonqualified scholarships is funding to pay for the following items:
- Room and board
- Travel Expenses
- Equipment and other expenses that are not required for enrollment.
Nonqualified scholarships paid to those in nonresident alien tax status are subject 14% federal income tax withholding and 5.599% North Carolina state income withholding unless exempted by a tax treaty.
Scholarships are processed and paid through NCSU’s Financial Aid Office. Scholarships paid to a Foreign National cannot be dispersed until a tax assessment is completed.
Fellowships
A fellowship is any amount paid, on behalf of an individual to enable him/her to pursue studies, or research. Fellowship grants are also classified as “Qualified Fellowships” and “Nonqualified Fellowships”.
Qualified fellowship grants must meet the following criteria:
- The recipient must be a candidate for a degree at an educational institute
- The funding must be used to pay for tuition, fees, books, supplies, and equipment that are required for registered courses.
Nonqualified fellowship grants is funding to pay for the following items:
- Room and board
- Travel Expenses
- Research
- Clerical help
- Equipment and other expenses that are not required for enrollment.
Nonqualified fellowships paid to those who are in nonresident alien tax status are subject 14% or 30% federal income tax withholding and 5.599% North Carolina state income withholding unless exempted by a tax treaty.
Fellowship grants are processed and paid through NCSU’s Financial Aid Office or through the Controller’s Office. Fellowship grants paid to a Foreign National cannot be processed until a tax assessment is completed.
There should never be services required to receive scholarship or fellowship income. If there is an expectation of services or of an end product to receive this income then this should be treated as employment and processed through payroll.
For more information, please see the following resources: