Financial Aid and the IRS

The Internal Revenue Service (IRS) may consider some forms of financial aid taxable.

Assistantships, Scholarships and Fellowships

Under current federal law, stipends for teaching and research assistantships are generally viewed as compensation for services and are therefore considered taxable income by the IRS. In some cases, however, where there is no work obligation, the stipend portion of a fellowship award is considered a “non-qualified scholarship” rather than compensation and is not taxable (DOUBLE CHECK THAT IT IS NOT TAXABLE).

The amount of your total scholarships and/or fellowships that exceed the cost of tuition, fees, books, supplies and equipment are generally considered by the IRS to be taxable income. U.S. recipients should consult with their tax advisor or contact the IRS concerning reporting requirements they may have.

Recipients who are not U.S. citizens will have taxes withheld and the amount of the award will be reported to the IRS by the university. Information can also be found in IRS publications 520 and 501. Free copies of these publications may be obtained by calling 1-800-TAX-FORM (829-3676) or by visiting the IRS website.

Taxable Federal Work-Study Earnings

Federal Work-Study paychecks are earned income and therefore are subject to federal, state and local tax withholding. Students employed under the Federal Work-Study program at Georgetown will receive a W-2 form documenting all earnings at Georgetown and are required to report those earnings as income on federal, state and local tax returns.

Tax Benefits

Provisions of the Taxpayer Relief Act of 1997 offer many tax benefits to students investing in higher education, including the Lifetime Learning Tax Credit, a deduction for student loan interest paid, more generous rules regarding withdrawals from education IRAs and favorable treatment of employer-provided education assistance benefits.

Detailed information about tax benefits is available from:

• The National Association of Student Financial Aid Administrators (NASFAA) Guide to Federal Tax Benefits for Tuition and Fees
• The U.S. Department of the Treasury Internal Revenue Service (IRS) Publication 970
• The U.S. Department of Education

Students who wish to claim either the Hope Credit or the Lifetime Learning Tax Credits for educational expenses must provide the government with a completed Form 1098-T to support the claim. In late January of each year, Georgetown mails Tuition Payment Statements (Form 1098-T) to hundreds of students who may be eligible to claim tax credits for educational expenses.

Further information about Form 1098-T can be obtained from the Office of Student Accounts. If you claim either the Hope Credit or the Lifetime Learning Credit, you will also need to attach IRS Form 8863 to your federal tax return.