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. The term scholarship at Princeton is typically used in reference to funding for an undergraduate student. A fellowship is an amount paid to, or for the benefit of, an individual to aid in the pursuit of study or research. The term fellowship at Princeton is typically used in reference to funding for a graduate student.
Taxation of Scholarships & Fellowships
Scholarship or fellowship payments may be taxable, depending upon whether the payments are classified as qualified or nonqualified under the Internal Revenue Code and related guidelines.
Scholarship and fellowship payments are nontaxable (qualified) and excluded from the recipient's gross income, when the following criteria are met:
- The recipient is a Princeton University student.
- The recipient is a candidate for a degree.
- The funding directly applies to the pursuit of study and research in the students' field of academic study.
- The funding is used for tuition, fees required for enrollment, books, supplies, equipment required for courses of instruction, or an academic program that is an integral and required part of the students' academic work.
- The funding relates to a program that has a reasonable time period for its completion.
- The academic program requires direct faculty involvement as the student is required to work with a faculty or staff member who serves as an academic adviser throughout the program.
- The funding relates to a program that is formally evaluated or graded by the faculty or staff as a requirement for completion and eventual student graduation.
- The funding relates to a program for which the student will receive academic credit for its completion.
- The funding does not represent any form of compensation or payment for employment services, nor does it have a direct business purpose to the University or our faculty.
- (if applicable) The funding is for travel excursions no longer than 90 days in duration, that are incidental and necessary to the pursuit of the study or research project, and specifically budgets and accounts for each required expense including travel, research, clerical assistance, and equipment expenditures.
Scholarship and fellowship payments are taxable (nonqualified) when the criteria listed above are not met. Nonqualified scholarships and fellowships are typically taxable to the recipient, and included in the recipient’s gross income.
Qualified Student Funding (Nontaxable)
The following student funding programs have been determined to be qualified scholarships and fellowships.
UNDERGRADUATE STUDENT FUNDING
- Junior Independent Work/Project
- Non-Princeton Courses and Programs Approved for Princeton Credit
- Senior Thesis Research
- Summer Study Abroad Programs Approved for Princeton Credit
GRADUATE STUDENT FUNDING
- Internship or Policy Workshop Requirement: Required for a degree, the internship or policy workshop training must apply to all students within this specific program, and be subject to formal faculty or academic adviser evaluation as a program requirement.
- Language Training Requirement: Required for a degree, the language training must apply to all students within this specific program, and be subject to formal faculty evaluation for the mandatory level of proficiency required within this program.
Nonqualified Student Funding (typically taxable)
Student funding programs that do not meet the qualified criteria listed above are considered to be nonqualified scholarships and fellowships. Examples include the following:
UNDERGRADUATE STUDENT FUNDING
- Internships: Domestic or International
- Non-Credit Research: Not part of Junior Independent Work/Project or Senior Thesis Research
- Summer Study Abroad Programs Not Approved for Princeton Credit
- UFAC (Undergraduate Funds for Academic Conferences)
GRADUATE STUDENT FUNDING
The study or training does not meet the requirements listed above of a qualified program.
- Archival Research: Not required by the degree program.
- Conference Funding: Not required by the degree program.
- Internships: Not required by the degree program.
- Language Training: Not required by the degree program.
- Museum Collection Research: Not required by the degree program.
- Professional Development Travel
- Scholarly Travel
Please contact the University Tax Department at email@example.com to discuss the determination of any qualified or nonqualified scholarship or fellowship.
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 (Nonresident Aliens)
Taxable scholarship or fellowship payments made to foreign nationals (nonresident 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 copies of your visa document.
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.