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Ross receives a $24,750 per year scholarship from University of Hawaii. The University specifies that $19,500...

Ross receives a $24,750 per year scholarship from University of Hawaii. The University specifies that $19,500 is for tuition, books, supplies, and equipment required for classes. The remaining portion is for room and board. As part of the condition of the scholarship, Ross must also work twelve hours per week as a grader, for which he is paid $10,500 for the year.

Of the total amount received, how much, if any, must Ross include in taxable income?

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Answer #1

Generally Scholarship is tax free if you are a degree candidate and the amount is used for books,Equipment and supplies,but not exempted for the amount you receive for room and board.

Also, any amount received being worked for 12 hours a week is taxable,even though it is as per condition laid in scholarship

Here,Ross receives $24750 as scholarship of which $19500 is for books,supplies and equipment related for classes and the balance i.e $5250 will be a taxable income.Also the amount received for working as a grader i.e $ 10500 will also be taxable.

Thus,The total taxable income of Ross is $15,750 ($5250 + $ 10,500).

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