Scholarships are forms of free money that enable you to pay for college. While their coverage varies, most of them can help you pay for tuition, room and board and any other related education expenses. However, there are scenarios in which winning a scholarship may cost you. Some scholarships are taxable – or they can be taxed depending on where you allocate the money. As you search for scholarships, you may be wondering, “How do I know if my scholarship is tax free?” Fortunately, we can help you identify which scholarships are taxable and how you can best strategize your scholarship winnings in order to get the most out of your money to pay for school.They are also considered tax free if they cover: • Tuition • Fees • Books, supplies and equipment for courses. However, there are education costs that are not tax free. These include: • Room and board • Travel • Research • Clerical help • Fees • Books and supplies that are not required for courses.If, for example, you win an award that covers tuition and room and board, you will not have to pay taxes on the tuition but you will on the room and board. Winning a scholarship that is not tax free should not be viewed as a penalty against you. The taxes you’re required to pay will be minimal, especially for the amount you’re given to help pay for school. Do not shy away from applying for scholarships that could be taxed. Consider any money that you get for free a worthy investment to pay for school.
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