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EDIT: It is really more of a "grant" than a "scholarship". Also, I qualify as a resident of Canada for this tax year.

I'm a US citizen in graduate school in Canada. I have an annual scholarship of around $20,000 CAD. I've been told (although I'm not sure) that this doesn't qualify as income in Canada (implying I wouldn't have to file taxes here).

Is that correct? Or do I need to file here in Canada?

And what about US federal income tax? Will I have to file in the US, too?

I'd also greatly appreciate any further information about which forms I need to complete and deadlines.

  • Until you get a more thorough answer, here's the IRS publication reated to tax treatment of scholarships: irs.gov/publications/p970/ch01.html. A cursory reading implies that you are probably not going to owe taxes on it in the US either in most cases. – JohnFx Mar 9 '15 at 21:21
  • Thanks, but I think I will need to declare most of it, actually (as Brian and Nate indicate). Quoting from the page you link: "Payment for services. Generally, you cannot exclude from your gross income the part of any scholarship or fellowship grant that represents payment for teaching, research, or other services required as a condition for receiving the scholarship. This applies even if all candidates for a degree must perform the services to receive the degree. (See exceptions next.)" – user2429920 Apr 13 '15 at 19:33
  • I believe that I will not have to pay any taxes, however, due to the foreign earned income exclustion: irs.gov/Individuals/International-Taxpayers/… I still don't know where to mention this on my 1040, though. – user2429920 Apr 13 '15 at 21:36
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Edit: Please also see the comments below. @NateEldredge has added some important information that has to be examined. Is the scholarship an actual scholarship or is part of it an assistantship/fellowship (common with graduate students, teaching assistants, et al.)? If the latter is true, the portion of the remuneration that is not spent on what the IRS determines as "qualified education expenses" will be employment income and thus, subject to taxation. I appreciate that Nate pointed this out.

Remember that you always have a filing requirement in the United States on the basis of U.S. citizenship in calendar years where income is greater than your standard deduction and personal exemption. That being said, there should be no tax liability provided the proceeds of your scholarship(s) were used for education purposes (such as tuition, books and materials, institutional fees, cost of living, et al.). Nevertheless, if you have any income, from any source whatsoever, you must file your tax return with the IRS.

If you have no income (part-time employment, investment income, side jobs or otherwise), it is still beneficial to file your tax return with the IRS, and most online tax programs (TurboTax, H&R Block, TaxACT, etc.) will help with any applicable reporting of scholarships, in addition to the potential credits/deductions that are available for students, such as the tuition and fees deduction, Lifetime Learning credit, et al. Further, depending on your age and personal situation, you may be a dependent of your parent(s) if they are claiming you as one, so you would need to coordinate with your parent(s) as to how they are proceeding with their tax return. Don't miss out on those education credits and deductions if they are available to you or your parent(s)!

I do want to emphasize that my understanding of the Canadian tax code is limited, and while I believe you would not have any tax liability for scholarships used for education purposes (especially if those scholarships are U.S.-sourced and you are not a Canadian resident), I recommend double checking with the Canada Revenue Agency. You'll want to know if your scholarships are U.S-sourced or Canada-sourced, as well as your visa status in Canada (resident or non-resident/student visa).

Canada Revenue Agency (CRA) Topic: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/130/schlrshp-eng.html

Best of luck in your education!

  • I don't think it's correct to lump in "cost of living" with tuition / books / fees. On page 21 of the Form 1040 instructions you can see that any amount of the scholarship not used for tuition or "course-related expenses" is treated as taxable income under US law. For graduate studies, it's not unusual for tuition and fees to be waived altogether, and a stipend paid to the student as well. If the $20,000 in the original question is the amount of the stipend, then except for any amount spent on books/materials, it's all taxable income. – Nate Eldredge Apr 6 '15 at 20:12
  • @NateEldredge Post-secondary institutions in the U.S. create an estimated cost of living for budgetary purposes and can be utilized for education-related expenses that are deemed lawful and necessary for the purposes of scholarships and student loans. Stipends paid to graduate students (fellows, and otherwise) are entirely different. That is tantamount to employment income which of course is always taxable income. – Brian Apr 7 '15 at 18:23
  • I'n not convinced that the cost-of-living estimate represents a non-taxable amount. It usually represents an amount that room, board, and incidental expenses are likely to cost. The description from the Form 1040 instructions I quote clearly says that amounts spent on "room, board and travel" can not be excluded from taxable income. There are other credits that may apply to this amount, but in my experience they are generally not available to graduate students. – Nate Eldredge Apr 7 '15 at 18:28
  • @NateEldredge You're correct in that stipends earmarked for room/board are not qualified education expenses. I'm uncertain whether the OP has received a scholarship or a fellowship grant (teaching/research assistant), as the latter would be employment income for any proceeds not spent on tuition, fees, materials, et al. IRS Pub. 970 states that "a scholarship or fellowship grant is tax free only to the extent (1) it does not exceed expenses; (2) it is not designated/earmarked for other purposes (room and board)…" Without a specific earmark designation, though, it should still be non-taxable. – Brian Apr 7 '15 at 18:48
  • It isn't quite the same as employment income. I received a fellowship from the NSF during my graduate studies which paid for tuition plus a stipend. The stipend (minus what I spent on books) was declared income on line 7, which is also where you put wages, salaries and tips. But it wasn't payment for services rendered to the NSF; I wasn't their employee; I didn't pay SSI or Medicare tax on it; it wasn't subject to withholding; and I didn't receive a W-2 for it. – Nate Eldredge Apr 7 '15 at 20:06

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