Definitions for Tax Purposes
- Scholarship: An amount paid or allowed to a student at an educational institution for the purpose of study.
- Fellowship: An amount paid or allowed to an individual for the purpose of study or research.
A Scholarship/Fellowship Award can be comprised of two different components:
- Compensation for services,
- Non-service based Scholarship/Fellowship.
Compensation for Services Component
A Scholarship/Fellowship award which requires an individual to perform a past, present or future service in order to receive payment is considered to have a compensation or services component.
Service based Scholarship/Fellowship payments are processed as employment through Central Resource Unit and are subject to tax withholding and reporting to the Internal Revenue Service (IRS) and Franchise Tax Board (FTB).
Example of Service component: a Scholarship/Fellowship Award indicates that “the student will provide research working 10 hours a week in Dr. Bruin’s lab, as part of their training.”
Non-Service Scholarship/Fellowship Awards
Non-Service based Scholarship/Fellowship awards are further categorized for tax purposes into Qualified or Non-Qualified.
- Qualified Scholarship/Fellowship: A Scholarship/Fellowship awarded to an individual who is a candidate for a degree at an educational institution, which is specifically paid towards tuition and required fees, is considered a Qualified Scholarship/Fellowship Award. Qualified Scholarship/Fellowship payments are excluded from federal tax withholding under Internal Revenue Code Section 117.
Qualified Scholarship/Fellowship expenses include:
- Tuition
- Required Fees
- Fees which are mandatory for the student’s major.
- Non-Qualified Scholarship/Fellowship Award: Scholarship/Fellowship funds that are used for the following items:
- Room and Board
- Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution
- Travel Grants for the benefit of the recipient of award,
- Health & Welfare benefits provided to a Non-Employee Postdoctoral Fellows/Scholars
- Any other Non-Employee Fellowship or Scholarship payments which exceed the amount of a students’ required fee’s and tuition.
Processing Scholarship/Fellowship Payments
Scholarship/Fellowship payments to UCLA students and scholars are processed through Graduate Student Support and Financial Aid through the Billing and Accounts Receivable (BAR) system.
For more information on processing fellowship scholarship payments to nonresidents at UCLA, see: How To Process a Fellowship Scholarship Payment to a Foreign National.
Tax Implications
At UCLA, Qualified Scholarship/Fellowship payments are excluded from tax withholding and reporting. Only Non-Qualified Scholarship/Fellowship payments are considered subject to Federal Tax Withholding and reporting.
Nonresidents receiving taxable Scholarship/Fellowship payments are set up with records on the GLACIER online tax reporting system to determine and document their tax status. GLACIER forms and documents are reviewed by Central Resource Unit.
