Are qualified scholarships and fellowships included in gross income?

Qualified scholarships and fellowships are generally not included in gross income. To qualify for this exclusion, the funds must be used for qualified education expenses such as tuition and fees required for enrollment or attendance at an eligible educational institution. Furthermore, the scholarships or fellowships must not require the recipient to perform services, such as teaching or research, in exchange for the funds.

When these conditions are met, the amounts received as qualified scholarships and fellowships are exempt from being counted as income, thus allowing students to benefit from financial support without it impacting their taxable income. This is crucial for students as it can significantly reduce their overall financial burden while pursuing their education.

While there are certain circumstances under which scholarships may affect tax status, such as when they cover non-educational expenses or have service requirements, this does not pertain to the classification of qualified scholarships and fellowships in general.