11 Dec My daughter got a summer camp scholarship. Is it taxable?

Q. My daughter won a scholarship for a summer camp. I’ve heard that college scholarships can be taxable. Would this be taxable also?
— Dad

A. You’re correct that certain scholarships are taxable.

Per IRS Publication 970, a scholarship or grant is tax-free or excludable from gross income only if the recipient is a candidate for a degree at an eligible educational institution.

But even if the recipient is pursuing a degree at an eligible educational institution, all the money received isn’t necessarily tax-free, said Michael Maye, a certified financial planner and certified public accountant with MJM Financial in Gillette.

He said scholarships and fellowships are only tax-free if the scholarship does not exceed qualified educational expenses, it is not designated for other purposes such as room and board and it isn’t payment for teaching, research, or other services required as a condition of receiving the scholarship.

You can read more about how scholarships are taxed here, and note how the Trump tax plan actually increased the tax rate for such scholarships.

“It would appear likely that a scholarship received to attend a summer camp would be reportable as part of your gross income,” he said. “However, even if is reportable as gross income, it will still reduce the cost of attending the summer camp for your daughter.”

Assuming she received a full scholarship, your cost would effectively be the marginal taxes owed on the value of the scholarship, he said.

Email your questions to .

This story was originally published on Dec. 11, 2019.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.