Yes, qualified scholarship and fellowship grants MIGHT BE treated as tax-free amounts, but please read the tax law carefully:
http://www.irs.gov/taxtopics/tc421.html
Qualified scholarship and fellowship grants are treated as tax-free amounts only if the following conditions are met:
· You are a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regular enrolled body of students in attendance at the place where it carries on its educational activities; and
· Amounts you receive as a scholarship or fellowship grant are used for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses of instruction.
According to 1098-T, the amount of (Box 5 - Box 6) should be scholarships or grants. However, only the amount of (Box 2 - Box 4) is considered as qualified tuition and related expenses.
If (Box 5 - Box 6）- （Box 2 - Box 4）> 0, then it means scholarships/grants not only covers qualified tuition and related expenses, but also covers a student’s room and board fees, non-academic credit course fees, etc,. Those portions of a scholarship or grant used to pay room and board and other non-acdemic fees cannot be tax-free as long as your (Box 5 - Box 6）- （Box 2 - Box 4）> $5046.
