<p>My son is in the process of receiving grant money for school. At this time I don't know what kind of grant other than it is 100% free. He is receiving it through our county we live in. Can he use this money to any school listed on their site WITHOUT paying taxes on this money? There is a school he'd like to go to out of our district, but is listed on their web site as a participating school for the funds. Someone told him he might have to pay taxes on the money if he goes to a school out of district. We do plan on using every penny towards the cost of the classes. The school is 1/2 hour from home, so their will be no other cost associated with this grant that he will be using this money for. Does anyone know about this?</p>
<p>In general, money from grants and scholarships that go directly for tuition will not be taxed. He does declare them though. Money used for room and board is declared and taxed.</p>
<p>It does not matter where a student goes to school. Grants and scholarships used to pay qualified education expenses (mostly tuition and fees and required books) are not taxable. Grants (including need based grants) and scholarships used to pay non education expenses (which includes room and board, travel etc) are taxable. IRS publication 970 has the details, page 5.
<a href=“http://www.irs.ustreas.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.ustreas.gov/pub/irs-pdf/p970.pdf</a></p>
<p>This is for federal taxes. You would have to check your State for any relevant tax rules. Our State the amounts taxable for federal tax also get hit with State tax. Another poster recently said their State does not charge state taxes on grants/scholarships.</p>