Updated October 21, 2026. Quick answer: Worksheet 1-1 in Publication 970 splits a scholarship or fellowship grant into a tax-free part and a taxable part. Money for required services and money for costs that are not qualified education expenses is taxable, and so is any amount above your qualified expenses. Line 9 is the taxable part.
What this worksheet is for
Publication 970 tells you it figures “the tax-free and taxable parts of your athletic scholarship.” and the same worksheet applies to any scholarship or fellowship grant. The related Form 1098-T boxes are at box 5 and box 1.
The worksheet line by line
| Line | What the worksheet says |
|---|---|
| Who it is for | “You can use Worksheet 1-1 to figure the tax-free and taxable parts of your scholarship or fellowship grant.” |
| 1 | “Enter the total amount of any scholarship or fellowship grant for 2025.” |
| After line 1 | “If you are a degree candidate at an eligible educational institution, go to line 2.” “If you aren’t a degree candidate at an eligible educational institution, stop here. The entire amount is taxable.” |
| 2 | “Enter the amount from line 1 that was for teaching, research, or any other services required as a condition for receiving the scholarship.” |
| 3 | “Subtract line 2 from line 1” |
| 4 | “Enter the amount from line 3 that your scholarship or fellowship grant required you to use for other than qualified education expenses” |
| 5 | “Subtract line 4 from line 3” |
| 6 | “Enter the amount of your qualified education expenses” |
| 7 | “Enter the smaller of line 5 or line 6.” “This amount is the most you can exclude from your gross income (the tax-free part of the scholarship or fellowship grant)” |
| 8 | “Subtract line 7 from line 5” |
| 9 | “Taxable part. Add lines 2, 4, and 8.” |
A worked example
Illustration, not an IRS example. Every input is invented, and the student is a degree candidate.
| Item | Illustration |
|---|---|
| Line 1: total grant (invented) | $12,000 |
| Line 2: part for required teaching (invented) | $2,000 |
| Line 3, computed: line 1 minus line 2 | $10,000 (computed) |
| Line 4: part the grant required for room and board (invented) | $3,000 |
| Line 5, computed: line 3 minus line 4 | $7,000 (computed) |
| Line 6: qualified education expenses (invented) | $6,000 |
| Line 7, computed: smaller of line 5 and line 6 | $6,000 (computed) |
| Line 8, computed: line 5 minus line 7 | $1,000 (computed) |
| Line 9, computed: line 2 + line 4 + line 8 | $6,000 (computed) |
Of the $12,000 grant, $6,000 is tax free (line 7) and $6,000 is taxable: $2,000 for services, $3,000 for room and board and $1,000 above the qualified expenses.
Where the taxable part goes
“If you file Form 1040 or 1040-SR, include any taxable amount reported to you in box 1 of Form W-2 in the total on line 1a.” “Include any taxable amount not reported to you in box 1 of Form W-2 on Schedule 1 (Form 1040), line 8r.” Line 8r is covered with the other Schedule 1 lines at Schedule 1 lines 8q to 8s.
The line on Schedule 1
The Schedule 1 caption for line 8r is “Scholarship and fellowship grants not reported on Form W-2”.
Other education aid in the same chapter
“These need-based grants are treated as scholarships for purposes of determining their tax treatment.” That sentence is about Pell grants and other Title IV need-based education grants. Credits for the same expenses are at education credits.
Edition and line numbers
This page reads Publication 970 (2025), the current file irs.gov served on 2026-10-21 (sha256 in the kit data). The Worksheet 1-1 in it is for the tax year 2025 return, filed in 2026. Check the tax year printed on the worksheet in your own copy and use that year’s line numbers and dollar amounts, because a different year’s worksheet can word its lines differently.
Common mistakes
- Treating the whole grant as tax free. Only the smaller of line 5 and line 6 is: “Enter the smaller of line 5 or line 6.”
- Skipping the degree-candidate test at line 1. Without it “The entire amount is taxable.”
- Assuming no return is needed. “You must report the taxable amount whether or not you received a Form W-2.”
Related: Form 1098-T box 5, Form 1098-T box 1, education credits, and Schedule 1 lines 8q to 8s.
Find the right next step for your situation
About how much do you have invested? Pick the range that fits; your next step appears immediately below.
Compare vetted advisors for family money planning
For U.S. investors with $250,000 or more in investable assets. WiserAdvisor is an independent service matching you with 2 to 3 vetted advisers. Its form asks for your ZIP code and answers to a few questions; a match is not guaranteed.
Free to request, with no obligation to hire. By submitting, you consent to calls, texts and emails from WiserAdvisor and up to three advisers. Advisers pay for introductions.
Clear Money Guide may earn a referral payment for a qualifying completed form. An introduction is not a Clear Money Guide recommendation.
Opens on WiserAdvisor’s site in a new tab.
See how an advisor can plan college costs
Price the destination before you decide. The matching service below introduces you to advisers who pay to meet you.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide may earn a referral payment for a qualifying submitted form, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here; you stay on this page.
What happens when you press the button
It asks about nine questions: age, investable assets, location; then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button.
Prefer flat-fee or hourly pricing instead? Compare ranges here.
Answer againSources
- Publication 970 (2025), Tax Benefits for Education: https://www.irs.gov/pub/irs-pdf/p970.pdf
- Schedule 1 (Form 1040) (2025), Additional Income and Adjustments to Income: https://www.irs.gov/pub/irs-pdf/f1040s1.pdf
Read from the IRS documents linked above on October 21, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.