Foreign Scholarship and Fellowship Income: US Tax Rules for Students Abroad

US students studying abroad on a scholarship or fellowship may have US tax obligations depending on the nature of the funding and how it is used. Scholarship or fellowship amounts used for tuition, fees, and required course materials at a qualifying educational institution are excluded from gross income under Section 117 and are not taxable. Amounts used for room and board, travel, or other personal expenses are taxable as ordinary income, and the location of the school, whether in the US or abroad, does not change this analysis for US citizens. If you are a US student at a foreign university that participates in the US federal student aid program, the scholarship exclusion still applies to qualifying expenses. Foreign scholarships that are paid in exchange for teaching, research, or other services are taxable as wages, not as a scholarship, even if the educational institution calls them a fellowship or stipend.