The scholarship isn't taxable income if you satisfy all of the following conditions:
- You're a candidate for a degree at an eligible educational institution.
- You use it to pay for:
- tuition and fees required for enrollment or attendance at the eligible educational institution, and
- course-related expenses, such as fees, books, supplies, and equipment required of all students for the courses of instruction at the eligible educational institution.
- The amount received doesn't represent payment for your services (unless the amount you receive is for services required by the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program), or a comprehensive student work-learning program (as defined in section 448(e) of the Higher Education Act of 1965) operated by a work college (as defined in that section).