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Taxation of Scholarship/Fellowship to Recipient

A scholarship or fellowship is not taxable to the recipient to the extent it is used for:  (i) required tuition and fees; and (ii) books, supplies and equipment required for courses. 

Under IRS rules, room and board, travel, insurance, and medical expenses (including student health fees) are not considered required expenses, therefore, a scholarship or fellowship used for any of these items is taxable income, which the student is required to report on their income tax return.

It is generally the sole responsibility of the student to determine the taxable portion of their scholarship or fellowship and to report and pay income taxes on the taxable portion.

UConn does not withhold income taxes on the taxable portion of a scholarship or fellowship except in limited circumstances involving nonresident alien students (see below).

Nonresident Alien (NRA) Students - Tax Office Review and NRA Tax Withholding Process

UConn is required to withhold 14% US income tax (called "NRA tax") on the taxable portion of a scholarship or fellowship awarded to an NRA student, unless the student qualifies for an exemption by way of an income tax treaty between the US and the student's home country. 

When a scholarship or fellowship is posted to the fee bill of a student who is not a US citizen, an NRA Tax Hold is placed on their account.

The purpose of the NRA Tax Hold is to prevent the student from taking a refund of their scholarship or fellowship before the Tax Office can determine if NRA tax withholding is required.

Once the Tax Office determines whether NRA tax withholding is required, they will post any required NRA tax withholding as an expense to the fee bill, and then remove the NRA Tax Hold from the student's account.