To report fellowship income on your tax return, put the taxable portion on Schedule 1 (Form 1040), line 8r, labeled “Scholarship and fellowship grants not reported on Form W-2.” That amount then flows to line 8 of your Form 1040 or 1040-SR.1Internal Revenue Service. Publication 970 Tax Benefits for Education The taxable portion is whatever your fellowship paid minus the amounts you spent on qualified education expenses, and because most schools don’t withhold federal tax from fellowship stipends, the full reporting responsibility sits with you.
Figure Out the Taxable Portion First
You can exclude fellowship money only if you’re a candidate for a degree at an eligible educational institution, and only to the extent you spent it on qualified expenses. Qualified means tuition, enrollment fees, and books, supplies, or equipment your courses require.2Office of the Law Revision Counsel. 26 USC 117 Qualified Scholarships “Required” is the operative word. A textbook listed on your syllabus counts. A laptop you thought would help doesn’t.
Everything else is non-qualified and stays in the taxable column: room, board, meal plans, health insurance, transportation, personal living costs. Publication 970 also lists research expenses as non-qualified for the scholarship exclusion, so paying assistants, buying specialized software, or traveling to a conference out of your stipend doesn’t reduce the taxable amount.1Internal Revenue Service. Publication 970 Tax Benefits for Education
Postdoctoral fellows, visiting researchers, and anyone not enrolled in a degree program get no exclusion at all. The entire fellowship is taxable.
Working From Your 1098-T
Your school’s Form 1098-T is the starting point. Box 1 shows qualified tuition and related expenses paid; Box 5 shows the total scholarships and grants the school administered on your behalf.3Internal Revenue Service. Instructions for Forms 1098-E and 1098-T If Box 5 exceeds Box 1, the difference is your presumptive taxable fellowship income.
Adjust from there. Required books and supplies you paid for out of pocket won’t appear on the 1098-T but still count as qualified expenses, so subtract them. If your Box 5 is $30,000, Box 1 is $22,000, and you spent $1,200 on required textbooks yourself, your taxable fellowship income is $6,800, not $8,000.
You bear the burden of showing which dollars went where, so keep the receipts, the award letter, and any breakdown from your department. Hold that documentation for at least three years from the date you filed, or two years from the date you paid the tax, whichever is later.4Internal Revenue Service. How Long Should I Keep Records
If You Never Received a 1098-T
Some recipients don’t get one — postdocs, researchers at institutions that don’t issue the form for certain awards, and students whose tuition was fully waived are common examples. You still report the taxable portion. Rebuild the calculation from your fellowship award letter, stipend payment records, tuition billing statements, and receipts. The IRS Interactive Tax Assistant walks through whether specific educational assistance is taxable and what information you’ll need.5Internal Revenue Service. Do I Include My Scholarship, Fellowship, or Education Grant as Income on My Tax Return
Watch for the Services-Required Portion
Any part of your award that pays you for teaching, research, or other services required as a condition of the fellowship is treated as compensation, not scholarship, and loses the exclusion entirely.2Office of the Law Revision Counsel. 26 USC 117 Qualified Scholarships This catches graduate teaching and research assistants regularly. If your department requires you to teach a section or work on a professor’s project in exchange for the money, that piece is wages.
When the school treats it that way, you’ll receive a W-2 for that portion. W-2 fellowship money goes on line 1a of Form 1040 with your other wages. Only the non-W-2 taxable fellowship amount belongs on Schedule 1, line 8r. Splitting them into the wrong line causes mismatches with what your school reported.
Narrow exceptions exist for certain military health professions scholarships, National Health Service Corps awards, and comprehensive work-learning-service programs at designated work colleges.
Plan for Estimated Tax Payments
Universities generally don’t withhold federal income tax from fellowship stipends. That’s the source of most of the pain: you can reach April owing several thousand dollars and an underpayment penalty on top.
The IRS expects estimated tax payments if you’ll owe $1,000 or more when you file.6Internal Revenue Service. Estimated Taxes For 2026, the quarterly deadlines are April 15, June 15, and September 15 of 2026, plus January 15, 2027. You can skip the January payment if you file your 2026 return by February 1, 2027, and pay in full then.7IRS.gov. Form 1040-ES Estimated Tax for Individuals Payments go through Form 1040-ES or the IRS online payment system.
You avoid the underpayment penalty if you owe less than $1,000 at filing, paid at least 90% of your current-year tax, or paid 100% of last year’s tax (110% if your prior-year adjusted gross income exceeded $150,000).8Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty First-year graduate students with little prior-year tax often use the 100%-of-prior-year safe harbor. Once you have a full year of fellowship income on the previous return, that shortcut disappears.
If you also have a part-time job or assistantship that does withhold, increasing withholding on that W-4 is often simpler than mailing quarterly checks.
FICA Doesn’t Apply to a Pure Fellowship
Taxable fellowship money that isn’t compensation for services is not subject to Social Security or Medicare taxes. No FICA, no self-employment tax. You pay regular income tax on the taxable portion and the payroll tax line stays at zero for that income. The exception, again, is any portion the school treats as wages for required services; if it shows up on a W-2, FICA has already been handled through withholding.
Nonresident Aliens Use a Different Form Path
If you’re on an F-1 or J-1 visa and classified as a nonresident alien for tax purposes, your institution will typically report fellowship payments on Form 1042-S rather than a W-2 or 1098-T. Put the taxable amount from box 2 of Form 1042-S on Schedule 1 (Form 1040-NR), line 8r, which flows to line 8 of Form 1040-NR. Any federal tax withheld (box 10 of the 1042-S) goes on Form 1040-NR, line 25g. Attach the 1042-S to the front of the return.9Internal Revenue Service. Instructions for Form 1040-NR
If your home country has a tax treaty with the United States covering scholarship or fellowship income, you may be able to exclude some or all of the award. To claim the exemption you have to give your institution a completed Form W-8BEN that includes your SSN or ITIN; a W-8BEN without a TIN cannot be accepted for treaty purposes.10Internal Revenue Service. Claiming Treaty Exemption for a Scholarship or Fellowship Grant If you receive both wages and a fellowship from the same institution and both are treaty-exempt, use Form 8233 to cover both at once. Treaties carry time limits that vary by country, and the exemption expires when you exceed them regardless of your continued student status.
Consider Reallocating to Claim an Education Credit
If your scholarship covers all your tuition, you might assume the American Opportunity Credit is off the table because you have no out-of-pocket qualified expenses. You have a choice, though: you can elect to treat part of the scholarship as taxable (allocated to living costs rather than tuition), which frees up a corresponding amount of tuition as a qualified expense eligible for the credit.1Internal Revenue Service. Publication 970 Tax Benefits for Education
The credit is worth up to $2,500, based on up to $4,000 in qualified expenses. Shifting $4,000 of scholarship into taxable income might cost you $400 to $900 in extra income tax depending on your bracket, and the credit can be worth up to $2,500. Two conditions have to hold: the scholarship’s terms must have allowed it to be used for non-qualified expenses, and your actual non-qualified expenses (rent, food, and so on) must be at least as large as the amount you’re reallocating. Run the numbers both ways before filing.
Why You Don’t Want to Skip This
The IRS automated matching system handles fellowship income efficiently. Schools report grants in Box 5 of the 1098-T, and if the taxable excess never appears on your return, a notice tends to follow. The failure-to-pay penalty is 0.5% of the unpaid tax for each month it remains outstanding, up to 25%, dropping to 0.25% per month if you set up an approved payment plan.11Internal Revenue Service. Failure to Pay Penalty Interest accrues on top. Missed quarterly estimates carry a separate underpayment penalty tied to the federal short-term rate plus three points.8Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty The dollar amounts for a single year are usually modest; the bigger risk is that a notice about unreported fellowship income opens up the rest of your return for review.