Most scholarship money is not taxable, the Internal Revenue Service reminded taxpayers on Feb. 12, but some of the funds can be.
Scholarship money used for tuition and required textbooks is not taxable, while scholarship money used for room and board is.
"A qualified scholarship or fellowship is any amount you receive that is for: Tuition and fees required to enroll at or attend an eligible educational institution, or course related expenses, such as fees, books, and equipment that are required for courses at the eligible educational institution. These items must be required of all students in your course of instruction," according to IRS Publication 525.
But in Publication 740, qualified education expenses do not include the "cost of room and board, travel, research, clerical help, payments received for past, present, or future services; equipment and other expenses that are not required."
Any portion of a scholarship used for payment for teaching is also taxable, even though the teaching is required to earn the scholarship.