Why are scholarships taxable?

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Curt Sheldon, Financial Advisor

@CurtSheldon • 07/02/15 This answer was first published on 07/02/15. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

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You might not need to pay taxes on it. Scholarships used for Qualified Tuition and Fees are not taxable.

On the other hand, scholarships used to pay for room and board are taxable.

So, depending what the scholarship is used for you may or may not need to pay taxes.

As to why...I don't know other than it is the law. Basic tax law states that, All income is taxable unless specifically exempted. Congress decided to exempt some scholarship income but not all...

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