Frequently Asked Questions

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Is a scholarship taxable if it is foreign-based?

Foreign nationals who are resident aliens are taxed on worldwide income in the same manner as U.S. citizens, so the source of their income is not relevant.

Nonresident aliens are taxed only on U.S.-source income and income connected to a U.S. trade or business. Therefore, Nonresident aliens are not taxed on foreign-source scholarship and fellowship grants.

A scholarship or fellowship grant is foreign-source if the grantor is a foreign resident, a foreign government, international organization, or if the grantor is a U.S. resident but the educational activity takes place outside the U.S.

I have a scholarship and all of it goes to tuition. Is this taxable?

No, as long as the organization giving you the tuition scholarship applies it directly to the school’s tuition, it is not taxable. However, if a grantor gives you cash and you then apply it to your tuition, the grantor is supposed to withhold 14% if you are in F, J, M, or Q immigration status and report the cash scholarship on Form 1042-S under Income Code 16.

You can obtain a refund of the amount withheld by filing a Form 1040NR-EZ and reducing the scholarship by the amount of your tuition. You will have to attach a letter from your school or an invoice which shows the amount of your tuition as proof that the cash was applied to your tuition.