For nonresident individuals filing Form 1040-NR, scholarship or fellowship grants received that are payment for teaching, research, or other services are generally taxable. Additionally, amounts received in excess of those spent on tuition, fees, books, and course-related supplies and equipment are also taxable.
Generally, these amounts are reported to the taxpayer on Form 1042-S Foreign Person’s U.S. Source Income Subject to Withholding. The amount in Form 1042-S Box 2 that represents payment not exempt by treaty, if any, is entered on line 12 of Form 1040-NR, and the portion of the Box 2 amount that is exempt by treaty, if any, is entered on Schedule OI and flows to line 22 of Form 1040-NR.
Amounts that were used for tuition, fees, books, and course-related supplies and equipment can be entered as an adjustment. To enter this adjustment, from the Main Menu of the tax return (Form 1040-NR) select:
- Scholarship & Fellowship Grants Excluded - Enter the amount of these expenditures but only to the extent they are included in Box 2 of Form 1042-S.