What You Should Know
A scholarship is money paid directly to or for the benefit of a student at an educational institution to aid in the pursuit of studies. A fellowship is an amount paid to or for the benefit of an individual to aid in the pursuit of study or research.
Taxation of Scholarships & Fellowships
Scholarship or fellowship payments may be taxable, dependent upon whether the payments are classified as qualified or nonqualified under the Internal Revenue guidelines.
- The recipient is a candidate for a degree; and
- The scholarship or fellowship amount is used for "qualified tuition and related expenses”. These expenses include tuition and fees required for enrollment or attendance at an educational institution, and fees, books, supplies, and equipment required for courses of instruction.
- Amounts are used for room, board, travel, equipment, incidental living expenses, stipends, and other expenses not required as part of their education;
- Amounts are given to non-degree candidates, such as post docs.
For more information see our Taxation of Scholarships & Fellowships chart.
Tax Withholding & Reporting for Scholarships & Fellowships
Tax withholding and reporting differ depending on your citizenship or resident status.
U.S. Citizens & Resident Aliens
Tax will not be withheld from scholarship or fellowship payments made to U.S. citizens or individuals classified as resident aliens for U.S. tax purposes.
Although the University will provide a letter to each recipient of a taxable scholarship or fellowship, the University is not required to report scholarship or fellowship income to the IRS. It is important to keep records and save the information you will need in order to prepare your personal tax return. Consult your personal tax adviser to discuss making estimated tax payments for the taxable portion of your fellowship income.
Foreign Nationals (Non-Resident Aliens)
Taxable scholarship or fellowship payments made to foreign nationals (non-resident aliens) may be subject to U.S. federal tax withholding and, if so, will be reported on a 1042-S Form. The 1042-S will be mailed by March 15 of the current year for the prior year reportable income. If your country of residence has a tax treaty with the United States, you can claim exemption from all or part of this withholding by submitting Form W-8BEN to Nonresident Tax Compliance and Reporting by U.S. mail or campus mail. Regardless of an available tax treaty benefit, the withholding rate depends on the type of visa you hold. For F, J, M, and Q visas, the withholding rate is 14%; for all other visas, the withholding rate is 30%.
If you need a duplicate Form 1042-S, see How to Request a Duplicate 1042-S Form Step-by-Step.
Tax Treaty Information & Instructions for Forms Related to Tax Treaty Benefit Applications
In order to receive tax treaty benefits, you must be from a country on the treaty list for scholarships, fellowships and compensation and you must have an International Tax Identification Number (ITIN). In most cases, the Glacier system will determine your treaty eligibility status for you.
For New Nonresident Graduate Students
When you first arrive at Princeton University, you will enter your information into the Glacier System. If you do not have an ITIN or SSN, you will not be able to claim tax treaty benefits.
To apply for an ITIN, complete the W-7 application following the instructions for applying for an ITIN. As part of the application process, you also will complete a W-8BEN form. Attach the W-8BEN form to the W-7 form with notarized copies of your visa document and send them to the IRS.
When you receive your ITIN from the IRS, log in to the Glacier System and enter your new ITIN. The system will then check to see if you are eligible to claim tax treaty benefits. Glacier will prompt you to print out another W-8BEN form along with other required forms. This time, send the form to Nonresident Tax Compliance and Reporting. Once the form is processed, the tax withheld from your fellowship payments will drop to 0%.
You do not have to apply for tax treaty benefits at the beginning of the year, or at all. You may choose to have the tax withheld and then apply for a refund/claim treaty benefits when you complete your personal tax return at the end of the year.