<p>It’s not the corporate scholarship itself that is subject to taxes. It’s the amount of money your child receives in the form of grants/scholarships (“free money”) over & above tuition and mandatory fees (including books that are required of every student in a particular course) that is taxable. You are required to report all outside scholarships to the college. At the end of the year, the college will send you IRS Form 1098-T, which lists the amount you received in scholarships. It also lists the amount of qualified expenses, from which you subtract the scholarships/grants to figure out how much (if any) is taxable income. The form is filed by the college with the IRS, I believe. Here is a good link that explains it: <a href=“http://www.keystone.edu/tuition_aid/1098_t.dot[/url]”>www.keystone.edu/tuition_aid/1098_t.dot</a>.</p>