Tax Treatment and Conditions
Qualified scholarships are excluded from income by Code Section 117. Qualified scholarships can cover tuition, fees,
books, supplies, and equipment.
If, as a condition of the scholarship or tuition reduction, the student is required to teach, provide research, or
other services, the exclusion does not apply.
Tuition reductions for the employees of educational organizations, and spouses and dependents of employees, are also
excluded from income.
This exclusion includes only education below the graduate level.
An exception to the undergraduate rule is made for qualified tuition reduction programs for graduate students who
are teaching or engaged in research activities for the organization.
Tuition reductions may be provided to a student at an educational institution other than the one where the employee
works.
There are no income limits on the student in order to qualify for the qualified scholarship or tuition reduction
exclusion.