<p>According to IRS Publication 970, scholarship funds that cover tuition, books, and mandatory fees are tax exempt, while any scholarship funds used for room, board, or dispersed in a refund are subject to income taxes. I am fortunate enough to have a "full ride" to the University of Maryland next year, and I anticipate receiving a refund of about $3500 due to outside scholarships that I have won. My question: will this money be considered "earned income", in the sense that is eligible to be put into a Roth IRA? Thanks a lot for your help.</p>
<p>Do not assume that you will be able to keep the outside scholarships if any part of your full ride is based on need. </p>
<p>As far as the IRA deduction the IRS takes the position that scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2. </p>
<p>In general terms, this means that scholarship income that is not part of "services" rendered to the school should not qualify.</p>
<p>Xiggi is right, as usual. Scholarships will not qualify as earned income. Work-study wages or teaching-assistant fellowships probably do.</p>