Scholarships/grants on Room & Board

NJEngineerDad
Fri, 11 Oct 2019 14:54:57 +0000

I think that this IRS presentation “Taxation of Scholarships and Fellowship Grants Paid to a Nonresident Alien” is a good read for those interested by the topic.

https://www.irs.gov/pub/int_practice_units/usbcuc_14_2_1_03.pdf

If I understand the examples correctly, the room and board part of the scholarship of a Japanese student studying in the US would typically be taxable in the US, but the room and board part of the scholarship of a Korean student would not (due to different tax treaties).

If I understand the presentation correctly, the university should only withhold a reduced 14% of the room and board part of the scholarship of a Japanese student. The student should then file a 1040NR(-EZ) to possibly reclaim some of the money.

By the way, I believe that the state in which the student study might still consider the room and board part of the scholarship taxable because typically tax treaties are signed between foreign countries and the US, and the individual states do not necessarily follow the same logic.