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Is a scholarship taxable if it is foreign-based?

  • Foreign nationals who are resident aliens are taxed on worldwide income in the same manner as U.S. citizens so the source of their income is not relevant.
  • Nonresident aliens are taxed only on U.S.-source income and income connected to a U.S. trade or business. Therefore, nonresident aliens are not taxed on foreign-source scholarship and fellowship grants.
  • A scholarship or fellowship grant is foreign-sourced if the grantor is a foreign resident, a foreign government, international organization, international organization, or if the grantor is a U.S. resident but the educational activity takes place outside the U.S