Withholding federal income tax on scholarships, fellowships and grants paid to nonresident aliens

In general, U.S. sourced taxable scholarships, fellowships, and grants that do not represent compensation for services are not subject to withholding when paid to United States (U.S.) citizens and resident aliens. However, they are subject to withholding when paid to nonresident aliens (NRAs).

The general withholding tax rate is 30%. However, the withholding tax rate may be reduced to 14% or a lower treaty rate, if the nonresident alien (NRA) is a student, researcher, or grantee who is temporarily present in the U.S. under an "F," "J," "M," or "Q" visa, and the taxable amounts received are either:

1. Incident to a qualified scholarship to which section 117(a) applies; or
2. Granted by certain types of organizations described in section 1441(b)(2).

If, immediately before arriving in the U.S., an NRA was a tax resident of a country that has an income tax treaty with the U.S., then the NRA may be eligible for benefits under the applicable treaty, such as an exemption from tax, with respect to a NRA’s scholarship, fellowship, or grant, including a specified amount that represents compensation for services.

Any part of a scholarship, fellowship, or grant that represents compensation for services performed in the U.S. is subject to graduated withholding.

For more information on scholarships, fellowships, and grants, see the "Scholarships and Fellowship Grants Subject to Chapter 3 Withholding" topic within the Withholding on Specific Income section of Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. See also Publication 519, U.S. Tax Guide for Aliens, and Form 8233, Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, and its instructions.

Related

• Foreign Students, Scholars, Teachers, Researchers and Exchange Visitors

Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court cases filed on or after May 1, 1986, visit the Opinions Search page of the United States Tax Court.