Title 26 — Internal Revenue CodeRelease 119-73
§117 Qualified scholarships
Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter B— - Computation of Taxable Income › Part PART III— - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME › § 117
Summary
You do not have to count some scholarships and tuition cuts as income if you are a degree student at an eligible school. A "qualified scholarship" is money given as a scholarship or fellowship that you use for required tuition and related course costs. "Qualified tuition and related expenses" means tuition and required fees, plus course-required fees, books, supplies, and equipment. Money you receive for required teaching, research, or other services is taxable, except for payments from the National Health Service Corps Scholarship Program, the Armed Forces Health Professions Scholarship and Financial Assistance program, or a work college’s comprehensive student work-learning-service program. A "qualified tuition reduction" is a tuition discount for employees (and certain people treated as employees) for education below the graduate level. If the discount favors highly paid employees, it is taxable unless offered on substantially the same terms to a non-discriminatory employee group. For graduate students who teach or do research, the "below the graduate level" limit does not apply.
Full Legal Text
Title 26, §117
Internal Revenue Code — Source: USLM XML via OLRC
(a)Gross income does not include any amount received as a qualified scholarship by an individual who is a candidate for a degree at an educational organization described in section 170(b)(1)(A)(ii).
(b)For purposes of this section—
(1)The term “qualified scholarship” means any amount received by an individual as a scholarship or fellowship grant to the extent the individual establishes that, in accordance with the conditions of the grant, such amount was used for qualified tuition and related expenses.
(2)For purposes of paragraph (1), the term “qualified tuition and related expenses” means—
(A)tuition and fees required for the enrollment or attendance of a student at an educational organization described in section 170(b)(1)(A)(ii), and
(B)fees, books, supplies, and equipment required for courses of instruction at such an educational organization.
(c)(1)Except as provided in paragraph (2), subsections (a) and (d) shall not apply to that portion of any amount received which represents payment for teaching, research, or other services by the student required as a condition for receiving the qualified scholarship or qualified tuition reduction.
(2)Paragraph (1) shall not apply to any amount received by an individual under—
(A)the National Health Service Corps Scholarship Program under section 338A(g)(1)(A) of the Public Health Service Act,
(B)the Armed Forces Health Professions Scholarship and Financial Assistance program under subchapter I of chapter 105 of title 10, United States Code, or
(C)a comprehensive student work-learning-service program (as defined in section 448(e) of the Higher Education Act of 1965) operated by a work college (as defined in such section).
(d)(1)Gross income shall not include any qualified tuition reduction.
(2)For purposes of this subsection, the term “qualified tuition reduction” means the amount of any reduction in tuition provided to an employee of an organization described in section 170(b)(1)(A)(ii) for the education (below the graduate level) at such organization (or another organization described in section 170(b)(1)(A)(ii)) of—
(A)such employee, or
(B)any person treated as an employee (or whose use is treated as an employee use) under the rules of section 132(h).
(3)Paragraph (1) shall apply with respect to any qualified tuition reduction provided with respect to any highly compensated employee only if such reduction is available on substantially the same terms to each member of a group of employees which is defined under a reasonable classification set up by the employer which does not discriminate in favor of highly compensated employees (within the meaning of section 414(q)). For purposes of this paragraph, the term “highly compensated employee” has the meaning given such term by section 414(q).
[(4)
(5)In the case of the education of an individual who is a graduate student at an educational organization described in section 170(b)(1)(A)(ii) and who is engaged in teaching or research activities for such organization, paragraph (2) shall be applied as if it did not contain the phrase “(below the graduate level)”.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
References in Text
section 338A(g)(1)(A) of the Public Health Service Act, referred to in subsec. (c)(2)(A), is classified to section 254l(g)(1)(A) of Title 42, The Public Health and Welfare. section 448(e) of the Higher Education Act of 1965, referred to in subsec. (c)(2)(C), is classified to section 1087–58(e) of Title 20, Education.
Amendments
2015—Subsec. (c)(2)(C). Pub. L. 114–113 added subpar. (C). 2001—Subsec. (c). Pub. L. 107–16 designated existing provisions as par. (1), inserted par. heading, substituted “Except as provided in paragraph (2), subsections (a)” for “Subsections (a)”, and added par. (2). 1996—Subsec. (d)(2)(B). Pub. L. 104–188 substituted “section 132(h)” for “section 132(f)”. 1989—Subsec. (d)(4). Pub. L. 101–140, § 203(a)(2), amended par. (4) to read as if
Amendments
by Pub. L. 100–647, § 1011B(a)(31)(B), had not been enacted, see 1988 Amendment note below. Pub. L. 101–140, § 203(a)(1), amended subsec. (d) to read as if
Amendments
by Pub. L. 99–514, § 1151(g)(2), which added par. (4), had not been enacted, see 1986 Amendment note below. 1988—Subsec. (d)(4). Pub. L. 100–647, § 1011B(a)(31)(B), substituted “there shall” for “there may” and “who are” for “who may be”. Subsec. (d)(5). Pub. L. 100–647, § 4001(b)(2), added par. (5). 1986—Pub. L. 99–514, § 123(a), in amending section generally, substituted “Qualified scholarships” for “Scholarships and fellowship grants” in section catchline. Subsec. (a). Pub. L. 99–514, § 123(a), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: “In the case of an individual, gross income does not include— “(1) any amount received— “(A) as a scholarship at an educational organization described in section 170(b)(1)(A)(ii), or “(B) as a fellowship grant, including the value of contributed services and accommodations; and “(2) any amount received to cover expenses for— “(A) travel, “(B) research, “(C) clerical help, or “(D) equipment, which are incident to such a scholarship or to a fellowship grant, but only to the extent that the amount is so expended by the recipient.” Subsec. (b). Pub. L. 99–514, § 123(a), in amending subsec. (b) generally, substituted qualified scholarship provision for former limitations provision, which related in par. (1) to individuals who were candidates for degrees, and in par. (2) to individuals who were not candidates for degrees, describing in subpar. (A) conditions for exclusion and in subpar. (B) extent of exclusion, such detailed provision now covered in subsec. (c). Subsec. (c). Pub. L. 99–514, § 123(a), in amending subsec. (c) generally, substituted limitation provision for former provision relating to Federal grants for tuition and related expenses not includable merely because there was requirement of future service as Federal employee. Subsec. (d). Pub. L. 99–514, § 123(a), in amending subsec. (d) generally, substituted “reduction” for “reductions” in heading and inserted “(within the meaning of section 414(q))” after “highly compensated employees” in par. (3). Subsec. (d)(3). Pub. L. 99–514, § 1114(b)(2), struck out “officer, owner, or” after “with respect to any” and “officers, owners, or” after “in favor of” and inserted at end “For purposes of this paragraph, the term ‘highly compensated employee’ has the meaning given such term by section 414(q).” Subsec. (d)(4). Pub. L. 99–514, § 1151(g)(2), added par. (4). 1984—Subsec. (d). Pub. L. 98–369 added subsec. (d). 1980—Subsec. (c). Pub. L. 96–541 added subsec. (c). 1976—Subsecs. (a)(1)(A), (b)(1), (2). Pub. L. 94–455, § 1901(b)(8)(A), substituted “educational organization described in section 170(b)(1)(A)(ii)” for “educational institution (as defined in section 151(e)(4))” after “scholarship at an”. Subsec. (b)(2)(A)(iv). Pub. L. 94–455, § 1901(c)(3), struck out “a territory” after “or a State”. Subsec. (b)(2)(B). Pub. L. 94–455, § 1901(b)(8)(A), substituted “educational organization described in section 170(b)(1)(A)(ii)” for “educational institution (as defined in section 151(e)(4))” after “degree at an”. 1961—Subsec. (b)(2)(A). Pub. L. 87–256 included cases where the grantor of the scholarship or fellowship grant is a foreign government, an international organization, or a binational or multinational educational and cultural foundation or commission created or continued pursuant to the Mutual Educational and Cultural Exchange Act of 1961.
Statutory Notes and Related Subsidiaries
Effective Date
of 2015 Amendment Pub. L. 114–113, div. Q, title III, § 301(b), Dec. 18, 2015, 129 Stat. 3086, provided that: “The
Amendments
made by this section [amending this section] shall apply to amounts received in taxable years beginning after the date of the enactment of this Act [Dec. 18, 2015].”
Effective Date
of 2001 Amendment Pub. L. 107–16, title IV, § 413(b), June 7, 2001, 115 Stat. 64, provided that: “The
Amendments
made by subsection (a) [amending this section] shall apply to amounts received in taxable years beginning after December 31, 2001.”
Effective Date
of 1996 AmendmentAmendment by Pub. L. 104–188 effective as if included in the provision of the Revenue Reconciliation Act of 1993, Pub. L. 103–66, §§ 13001–13444, to which such amendment relates, see section 1703(o) of Pub. L. 104–188, set out as a note under section 39 of this title.
Effective Date
of 1989 AmendmentAmendment by Pub. L. 101–140 effective as if included in section 1151 of Pub. L. 99–514, see section 203(c) of Pub. L. 101–140, set out as a note under section 79 of this title.
Effective Date
of 1988 AmendmentAmendment by section 1011B(a)(31)(B) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title. Pub. L. 100–647, title IV, § 4001(c), Nov. 10, 1988, 102 Stat. 3643, provided that: “The
Amendments
made by this section [amending this section and section 127 of this title] shall apply to taxable years beginning after December 31, 1987.”
Effective Date
of 1986 AmendmentAmendment by section 123(a) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, but only in the case of scholarships and fellowships granted after Aug. 16, 1986, see section 151(d) of Pub. L. 99–514, set out as a note under section 1 of this title. Amendment by section 1114(b)(2) of Pub. L. 99–514 applicable to years beginning after Dec. 31, 1987, see section 1114(c)(2) of Pub. L. 99–514, set out as a note under section 414 of this title. Amendment by section 1151(g)(2) of Pub. L. 99–514 applicable, with certain qualifications and exceptions, to years beginning after Dec. 31, 1988, see section 1151(k) of Pub. L. 99–514, as amended, set out as a note under section 79 of this title.
Effective Date
of 1984 Amendment Pub. L. 98–369, div. A, title V, § 532(b),
July 18, 1984, 98 Stat. 887, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “The amendment made by this section [amending this section] shall apply to qualified tuition reductions (as defined in section 117(d)(2) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) for education furnished after
June 30, 1985, in taxable years ending after such date.” Provisions of subsec. (d) treated as in effect on and after Jan. 1, 1984, in case of education described in section 127(c)(8) of this title, see section 1(g)(5) of Pub. L. 98–611, set out as a note under section 127 of this title.
Effective Date
of 1980 Amendment Pub. L. 96–541, § 5(a)(2), Dec. 17, 1980, 94 Stat. 3206, provided: “The amendment made by paragraph (1) [amending this section] shall apply to taxable years beginning after December 31, 1980.”
Effective Date
of 1976 AmendmentAmendment by Pub. L. 94–455 applicable with respect to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.
Effective Date
of 1961 Amendment Pub. L. 87–256, § 110(h)(1), Sept. 21, 1961, 75 Stat. 537, provided that: “The
Amendments
made by subsections (a), (b), and (c) of this section [amending this section and section 871 and 872 of this title] shall apply to taxable years beginning after December 31, 1961.”
Regulations
Secretary of the Treasury or his delegate to issue before Feb. 1, 1988, final
Regulations
to carry out
Amendments
made by section 1114 of Pub. L. 99–514, see section 1141 of Pub. L. 99–514, set out as a note under section 401 of this title. Non
Enforcement
of Amendment Made by section 1151 of Pub. L. 99–514 for Fiscal Year 1990No monies appropriated by Pub. L. 101–136 to be used to implement or enforce section 1151 of Pub. L. 99–514 or the
Amendments
made by such section, see section 528 of Pub. L. 101–136, set out as a note under section 89 of this title. Applicability of Certain
Amendments
by Public Law 99–514 in Relation to Treaty Obligations of United StatesFor nonapplication of amendment by section 123(a) of Pub. L. 99–514 to the extent application of such amendment would be contrary to any treaty obligation of the United States in effect on Oct. 22, 1986, with provision that for such purposes any amendment by title I of Pub. L. 100–647 be treated as if it had been included in the provision of Pub. L. 99–514 to which such amendment relates, see section 1012(aa)(3), (4) of Pub. L. 100–647, set out as a note under section 861 of this title. Plan
Amendments
Not Required Until January 1, 1989For provisions directing that if any
Amendments
made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title. Transitional Rules for Treatment of Certain Reductions in Tuition Pub. L. 99–514, title XVIII, § 1853(f), Oct. 22, 1986, 100 Stat. 2872, provided that: “(1) A tuition reduction plan shall be treated as meeting the requirements of section 117(d)(3) of the Internal Revenue Code of 1954 [now 1986] if—“(A) such plan would have met the requirements of such section (as amended by this section but without regard to the lack of evidence that benefits under such plan were the subject of good faith bargaining) on the day on which eligibility to participate in the plan was closed, “(B) at all times thereafter, the tuition reductions available under such plan are available on substantially the same terms to all employees eligible to participate in such plan, and “(C) the eligibility to participate in such plan closed on
June 30, 1972,
June 30, 1974, or
December 31, 1975. “(2) For purposes of applying section 117(d)(3) of the Internal Revenue Code of 1954 [now 1986] to all tuition reduction plans of an employer with at least 1 such plan described in paragraph (1) of this subsection, there shall be excluded from consideration employees not included in the plan who are included in a unit of employees covered by an agreement that the Secretary of the Treasury or his delegate finds to be a collective bargaining agreement between employee representatives and 1 or more employers, if, with respect to plans other than plans described in paragraph (1), there is evidence that such benefits were the subject of good faith bargaining. “(3) Any reduction in tuition provided with respect to a full-time course of education furnished at the graduate level before
July 1, 1988, shall not be included in gross income if—“(A) such reduction would not be included in gross income under the Internal Revenue Service
Regulations
in effect on the date of the enactment of the Tax Reform Act of 1984 [
July 18, 1984], and “(B) such reduction is provided with respect to a student who was accepted for admission to such course of education before
July 1, 1984, and began such course of education before
June 30, 1985.” National Research Service Awards Pub. L. 95–600, title I, § 161(b), Nov. 6, 1978, 92 Stat. 2810, as amended by Pub. L. 96–167, § 9(b), Dec. 29, 1979, 93 Stat. 1278; Pub. L. 96–541, § 5(b), Dec. 17, 1980, 94 Stat. 3206; Pub. L. 97–248, title II, § 285, Sept. 3, 1982, 96 Stat. 569; Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that any amount paid to, or on behalf of, an individual as a national research service award under former section 289l–1 of title 42 during calendar years 1974 through 1983 was to be treated as a scholarship or fellowship grant under this section. Scholarship Programs for Members of the Uniformed Services Pub. L. 93–483, § 4, Oct. 26, 1974, 88 Stat. 1458, as amended Pub. L. 94–455, title XXI, § 2130, Oct. 4, 1976, 90 Stat. 1922; Pub. L. 95–171, § 5, Nov. 12, 1977, 91 Stat. 1355; Pub. L. 95–600, title I, § 161(a), Nov. 6, 1978, 92 Stat. 2810; Pub. L. 95–615, title I, § 6, Nov. 8, 1978, 92 Stat. 3098; Pub. L. 96–167, § 9(a), Dec. 29, 1979, 93 Stat. 1278; Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “(a) In General.—Any amount received from appropriated funds as a scholarship, including the value of contributed services and accommodations, by a member of a uniformed service who is receiving training under the Armed Forces Health Professions Scholarship Program (or any other program determined by the Secretary of the Treasury or his delegate to have substantially similar objectives) from an educational institution (as defined in section 151(e)(4) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) [see section 170(b)(1)(A)(ii) of this title] shall be treated as a scholarship under section 117 of such Code [this section], whether that member is receiving training while on active duty or in an off-duty or inactive status, and without regard to whether a period of active duty is required of the member as a condition of receiving those payments. “(b) Definition of Uniformed Services.—For purposes of this section, the term ‘uniformed service’ has the meaning given it by section 101(3) of title 37, United States Code. “(c)
Effective Date
.—The provisions of this section shall apply with respect to amounts received during calendar years 1973, 1974, and 1975, and, in the case of a member of a uniformed service receiving training after 1975 and before 1981 in programs described in subsection (a), with respect to amounts received after 1975 and before 1985.” [section 6 of Pub. L. 95–615, which reenacted § 4(c) of Pub. L. 93–483 without change, to cease to have effect on the day after Nov. 8, 1978, see section 210(a) of Pub. L. 95–615, set out as a note under section 61 of this title.]
Reference
Citations & Metadata
Citation
26 U.S.C. § 117
Title 26 — Internal Revenue Code
Last Updated
Apr 6, 2026
Release point: 119-73