Taxable scholarship money that didn’t come to you on a W-2 is reported on Schedule 1 (Form 1040), line 8r, and the Schedule 1 total then carries to line 8 of your Form 1040 or 1040-SR.1Internal Revenue Service. 2025 Schedule 1 (Form 1040) If your school did issue a W-2 for the taxable portion, it goes on Form 1040, line 1a with the rest of your wages.2Internal Revenue Service. Publication 970 – Tax Benefits for Education – Section: Reporting Scholarships and Fellowship Grants Which line applies depends on the paperwork you received, and how much of the scholarship is taxable in the first place depends on how you spent it.
Which Line to Use
Two paths, driven by whether a W-2 was issued.
- No W-2. Put the taxable amount on Schedule 1, line 8r. That line is labeled specifically for scholarship and fellowship grants not reported on a W-2. The Schedule 1 total flows to Form 1040, line 8.1Internal Revenue Service. 2025 Schedule 1 (Form 1040)
- W-2 issued. Include the box 1 amount in your total on Form 1040, line 1a alongside any other wages.2Internal Revenue Service. Publication 970 – Tax Benefits for Education – Section: Reporting Scholarships and Fellowship Grants
Older IRS instructions told filers to write “SCH” next to a scholarship amount entered on Form 1040. That step is gone. Line 8r on Schedule 1 now handles it, and tax software places the number there automatically once you enter your scholarship details.1Internal Revenue Service. 2025 Schedule 1 (Form 1040)
How Much of Your Scholarship Is Actually Taxable
You only report the taxable portion, so calculate that first. Federal law excludes scholarship money from gross income when you’re a degree-seeking student and you spend the funds on qualified education expenses: tuition, enrollment fees, and books, supplies, or equipment your courses require.3Office of the Law Revision Counsel. 26 USC 117 – Qualified Scholarships The word that matters is “required.” A lab kit your chemistry class demands counts. A laptop you bought because it made life easier does not, unless your school or a specific course mandates it as a condition of enrollment.4Internal Revenue Service. Publication 970 – Tax Benefits for Education
Everything else you spent scholarship money on is taxable: room and board, travel, meal plans, and optional supplies all fall outside the exclusion. Add up the scholarship and fellowship money you received during the year, subtract what you actually spent on qualified expenses, and what’s left is your taxable scholarship income. Publication 970 has a step-by-step worksheet (Worksheet 1-1) if you want to work through it on paper.4Internal Revenue Service. Publication 970 – Tax Benefits for Education
When a Scholarship Counts as Wages Instead
If your scholarship requires you to teach, do research, or perform other services as a condition of receiving the money, the payments are treated as wages rather than as a scholarship.5Internal Revenue Service. Topic No. 421, Scholarships, Fellowship Grants, and Other Grants Your school should issue a W-2, and you report it on Form 1040, line 1a with any other wages.2Internal Revenue Service. Publication 970 – Tax Benefits for Education – Section: Reporting Scholarships and Fellowship Grants The exclusion for qualified education expenses doesn’t apply to that portion, because it’s compensation for work.
Do You Even Have to File?
Plenty of students with a taxable scholarship don’t owe tax or need to file at all. The IRS treats taxable scholarship income as earned income, so it gets the same treatment as wages for filing-threshold purposes and for the standard deduction.6Internal Revenue Service. Publication 501 (2025), Dependents, Standard Deduction, and Filing Information
If someone can claim you as a dependent (as most college students can be claimed), your 2025 standard deduction is the greater of $1,350 or your earned income plus $450, capped at the full single standard deduction of $15,750.7Internal Revenue Service. Topic No. 551, Standard Deduction A dependent student whose only income is $4,000 in taxable scholarship money gets a $4,450 standard deduction ($4,000 + $450), which wipes out the tax on that scholarship.
A single dependent under 65 must file if earned income exceeds $15,750, unearned income exceeds $1,350, or gross income exceeds the larger of $1,350 or earned income plus $450.6Internal Revenue Service. Publication 501 (2025), Dependents, Standard Deduction, and Filing Information Because taxable scholarships count as earned income for these thresholds, many students with modest awards fall below them. Filing anyway can still be worth it if you qualify for a refundable credit.
The AOTC Choice That Can Change What You Report
Here’s why the reporting decision isn’t purely mechanical. The American Opportunity Tax Credit is worth up to $2,500 per year, based on the first $4,000 you pay in qualified education expenses.8Internal Revenue Service. American Opportunity Tax Credit Before you calculate the credit, you have to subtract tax-free scholarship money from your qualified expenses. If a scholarship covered all your tuition, you may have $0 in qualifying expenses and no credit at all.
You have some control over this. If your scholarship or Pell Grant is allowed to be used for living expenses (most are), you can elect to treat some of it as taxable income by including that amount on your return. The dollars you shift to living expenses no longer offset your qualified education expenses, so more of your tuition becomes eligible for the AOTC.9Internal Revenue Service. Publication 970 – Tax Benefits for Education – Section: Coordination with Pell Grants and Other Scholarships
The credit covers 100% of the first $2,000 in qualified expenses plus 25% of the next $2,000, for a maximum $2,500. Up to $1,000 of it is refundable, meaning you can receive it even if you owe no tax. Voluntarily adding, say, $3,000 of Pell Grant to income creates $3,000 more in qualifying tuition, and if your standard deduction absorbs most of the added tax, the net can come out ahead. The break-even depends on your numbers, so run it both ways. The AOTC phases out for single filers with modified adjusted gross income above $80,000 and disappears above $90,000.8Internal Revenue Service. American Opportunity Tax Credit
Documentation to Keep
Your school should send Form 1098-T by January 31. Box 1 shows payments received for qualified tuition; box 5 shows total scholarships and grants the school processed for you.10Internal Revenue Service. About Form 1098-T, Tuition Statement Don’t treat those figures as final. The 1098-T often misses books or required supplies you bought outside the campus bookstore, and it may sweep in scholarships that actually went to housing.
Keep receipts for course-required books, supplies, and equipment you paid for yourself. If the IRS questions your return, they’ll ask for canceled checks or receipts showing fees, books, and supplies were required for your courses.11Internal Revenue Service. Topic No. 654, Understanding Your CP75 or CP75A Notice Saving a PDF of each syllabus that lists required materials is the easiest way to show a purchase was required rather than optional.
Hold onto your 1098-T, receipts, and a copy of your filed return for at least three years from the date you filed. If you underreported income by more than 25% of your gross income, the IRS has six years to audit, so leaning toward keeping records longer is the safer call.12Internal Revenue Service. How Long Should I Keep Records?