Forbes blogger Kelly Phillips provides some great tips on the tax implications of fellowships. Kelly writes:
“A scholarship or fellowship is tax free only if you are pursuing a degree at an eligible educational institution and you use the scholarship or fellowship to pay qualified education expenses. Qualified expenses include tuition and fees as well as course-related expenses, such as fees, books, supplies, and equipment that are required by the institution.”
Most fellowships that provide a stipend for teaching, research or professional work are taxable as income. It’s a good idea that you put some of your stipend aside for taxes when you file.
Fellowships in foreign countries may be tax-free in that country, but in some cases you must claim the fellowship as income when filing your U.S. taxes. If you’re uncertain, ask a tax professional for advice.