US Code

Public Law 119-87 (04/30/2026)

26 U.S.C. § 117

Qualified scholarships

(a)

General rule

Gross income does not include any amount received as a qualified scholarship by an individual who is a candidate for a degree at an educational organization described in section 170(b)(1)(A)(ii).

(b)

Qualified scholarship

For purposes of this section—
(1)

In general

The term “qualified scholarship” means any amount received by an individual as a scholarship or fellowship grant to the extent the individual establishes that, in accordance with the conditions of the grant, such amount was used for qualified tuition and related expenses.

(2)

Qualified tuition and related expenses

For purposes of paragraph (1), the term “qualified tuition and related expenses” means—
(A)
tuition and fees required for the enrollment or attendance of a student at an educational organization described in section 170(b)(1)(A)(ii), and
(B)
fees, books, supplies, and equipment required for courses of instruction at such an educational organization.
(c)

Limitation

(1)

In general

Except as provided in paragraph (2), subsections (a) and (d) shall not apply to that portion of any amount received which represents payment for teaching, research, or other services by the student required as a condition for receiving the qualified scholarship or qualified tuition reduction.

(2)

Exceptions

Paragraph (1) shall not apply to any amount received by an individual under—
(A)
the National Health Service Corps Scholarship Program under section 338A(g)(1)(A) of the Public Health Service Act,
(B)
the Armed Forces Health Professions Scholarship and Financial Assistance program under subchapter I of chapter 105 of title 10, United States Code, or
(C)
a comprehensive student work-learning-service program (as defined in section 448(e) of the Higher Education Act of 1965) operated by a work college (as defined in such section).
(d)

Qualified tuition reduction

(1)

In general

Gross income shall not include any qualified tuition reduction.

(2)

Qualified tuition reduction

For purposes of this subsection, the term “qualified tuition reduction” means the amount of any reduction in tuition provided to an employee of an organization described in section 170(b)(1)(A)(ii) for the education (below the graduate level) at such organization (or another organization described in section 170(b)(1)(A)(ii)) of—
(A)
such employee, or
(B)
any person treated as an employee (or whose use is treated as an employee use) under the rules of section 132(h).
(3)

Reduction must not discriminate in favor of highly compensated, etc.

Paragraph (1) shall apply with respect to any qualified tuition reduction provided with respect to any highly compensated employee only if such reduction is available on substantially the same terms to each member of a group of employees which is defined under a reasonable classification set up by the employer which does not discriminate in favor of highly compensated employees (within the meaning of section 414(q)). For purposes of this paragraph, the term “highly compensated employee” has the meaning given such term by section 414(q).

[(4)

Pub. L. 101–140, title II, § 203(a)(1)103 Stat. 830 Repealed. , (2), , ]

(5)

Special rules for teaching and research assistants

In the case of the education of an individual who is a graduate student at an educational organization described in section 170(b)(1)(A)(ii) and who is engaged in teaching or research activities for such organization, paragraph (2) shall be applied as if it did not contain the phrase “(below the graduate level)”.

Aug. 16, 1954, ch. 736 68A Stat. 38 Pub. L. 87–256, § 110(a)75 Stat. 535 Pub. L. 94–455, title XIX, § 1901(b)(8)(A)90 Stat. 1794 Pub. L. 96–541, § 5(a)(1)94 Stat. 3205 Pub. L. 98–369, div. A, title V, § 532(a)98 Stat. 887 Pub. L. 99–514, title I, § 123(a)100 Stat. 2112 Pub. L. 100–647, title I, § 1011B(a)(31)(B)102 Stat. 3488 Pub. L. 101–140, title II, § 203(a)(1)103 Stat. 830 Pub. L. 104–188, title I, § 1703(n)(14)110 Stat. 1878 Pub. L. 107–16, title IV, § 413(a)115 Stat. 64 Pub. L. 114–113, div. Q, title III, § 301(a)129 Stat. 3086 (, ; , , ; , (c)(3), , , 1803; , , ; , , ; , title XI, §§ 1114(b)(2), 1151(g)(2), , , 2450, 2506; , title IV, § 4001(b)(2), , , 3643; , (2), , ; , , ; , , ; , , .)

Editorial Notes

References in Text

lSection 338A(g)(1)(A) of the Public Health Service Act, referred to in subsec. (c)(2)(A), is classified to section 254(g)(1)(A) of Title 42, The Public Health and Welfare.

section 1087–58(e) of Title 20Section 448(e) of the Higher Education Act of 1965, referred to in subsec. (c)(2)(C), is classified to , Education.

Amendments

Pub. L. 114–1132015—Subsec. (c)(2)(C). added subpar. (C).

Pub. L. 107–162001—Subsec. (c). designated existing provisions as par. (1), inserted par. heading, substituted “Except as provided in paragraph (2), subsections (a)” for “Subsections (a)”, and added par. (2).

Pub. L. 104–1881996—Subsec. (d)(2)(B). substituted “section 132(h)” for “section 132(f)”.

Pub. L. 101–140, § 203(a)(2)Pub. L. 100–647, § 1011B(a)(31)(B)1989—Subsec. (d)(4). , amended par. (4) to read as if amendments by , had not been enacted, see 1988 Amendment note below.

Pub. L. 101–140, § 203(a)(1)Pub. L. 99–514, § 1151(g)(2), amended subsec. (d) to read as if amendments by , which added par. (4), had not been enacted, see 1986 Amendment note below.

Pub. L. 100–647, § 1011B(a)(31)(B)1988—Subsec. (d)(4). , substituted “there shall” for “there may” and “who are” for “who may be”.

Pub. L. 100–647, § 4001(b)(2)Subsec. (d)(5). , added par. (5).

Pub. L. 99–514, § 123(a)1986—, in amending section generally, substituted “Qualified scholarships” for “Scholarships and fellowship grants” in section catchline.

Pub. L. 99–514, § 123(a)Subsec. (a). , amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: “In the case of an individual, gross income does not include—

“(1) any amount received—

“(A) as a scholarship at an educational organization described in section 170(b)(1)(A)(ii), or

“(B) as a fellowship grant, including the value of contributed services and accommodations; and

“(2) any amount received to cover expenses for—

“(A) travel,

“(B) research,

“(C) clerical help, or

“(D) equipment,

which are incident to such a scholarship or to a fellowship grant, but only to the extent that the amount is so expended by the recipient.”

Pub. L. 99–514, § 123(a)Subsec. (b). , in amending subsec. (b) generally, substituted qualified scholarship provision for former limitations provision, which related in par. (1) to individuals who were candidates for degrees, and in par. (2) to individuals who were not candidates for degrees, describing in subpar. (A) conditions for exclusion and in subpar. (B) extent of exclusion, such detailed provision now covered in subsec. (c).

Pub. L. 99–514, § 123(a)Subsec. (c). , in amending subsec. (c) generally, substituted limitation provision for former provision relating to Federal grants for tuition and related expenses not includable merely because there was requirement of future service as Federal employee.

Pub. L. 99–514, § 123(a)Subsec. (d). , in amending subsec. (d) generally, substituted “reduction” for “reductions” in heading and inserted “(within the meaning of section 414(q))” after “highly compensated employees” in par. (3).

Pub. L. 99–514, § 1114(b)(2)Subsec. (d)(3). , struck out “officer, owner, or” after “with respect to any” and “officers, owners, or” after “in favor of” and inserted at end “For purposes of this paragraph, the term ‘highly compensated employee’ has the meaning given such term by section 414(q).”

Pub. L. 99–514, § 1151(g)(2)Subsec. (d)(4). , added par. (4).

Pub. L. 98–3691984—Subsec. (d). added subsec. (d).

Pub. L. 96–5411980—Subsec. (c). added subsec. (c).

Pub. L. 94–455, § 1901(b)(8)(A)1976—Subsecs. (a)(1)(A), (b)(1), (2). , substituted “educational organization described in section 170(b)(1)(A)(ii)” for “educational institution (as defined in section 151(e)(4))” after “scholarship at an”.

Pub. L. 94–455, § 1901(c)(3)Subsec. (b)(2)(A)(iv). , struck out “a territory” after “or a State”.

Pub. L. 94–455, § 1901(b)(8)(A)Subsec. (b)(2)(B). , substituted “educational organization described in section 170(b)(1)(A)(ii)” for “educational institution (as defined in section 151(e)(4))” after “degree at an”.

Pub. L. 87–2561961—Subsec. (b)(2)(A). included cases where the grantor of the scholarship or fellowship grant is a foreign government, an international organization, or a binational or multinational educational and cultural foundation or commission created or continued pursuant to the Mutual Educational and Cultural Exchange Act of 1961.

Statutory Notes and Related Subsidiaries

Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title III, § 301(b)129 Stat. 3086

“The amendments made by this section [amending this section] shall apply to amounts received in taxable years beginning after the date of the enactment of this Act [].”
, , , provided that:

Effective Date of 2001 Amendment

Pub. L. 107–16, title IV, § 413(b)115 Stat. 64

“The amendments made by subsection (a) [amending this section] shall apply to amounts received in taxable years beginning after .”
, , , provided that:

Effective Date of 1996 Amendment

Pub. L. 104–188Pub. L. 103–66oPub. L. 104–188section 39 of this titleAmendment by effective as if included in the provision of the Revenue Reconciliation Act of 1993, , §§ 13001–13444, to which such amendment relates, see section 1703() of , set out as a note under .

Effective Date of 1989 Amendment

Pub. L. 101–140section 1151 of Pub. L. 99–514section 203(c) of Pub. L. 101–140section 79 of this titleAmendment by effective as if included in , see , set out as a note under .

Effective Date of 1988 Amendment

section 1011B(a)(31)(B) of Pub. L. 100–647Pub. L. 99–514section 1019(a) of Pub. L. 100–647section 1 of this titleAmendment by effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, , to which such amendment relates, see , set out as a note under .

Pub. L. 100–647, title IV, § 4001(c)102 Stat. 3643

section 127 of this title“The amendments made by this section [amending this section and ] shall apply to taxable years beginning after .”
, , , provided that:

Effective Date of 1986 Amendment

section 123(a) of Pub. L. 99–514section 151(d) of Pub. L. 99–514section 1 of this titleAmendment by applicable to taxable years beginning after , but only in the case of scholarships and fellowships granted after , see , set out as a note under .

section 1114(b)(2) of Pub. L. 99–514section 1114(c)(2) of Pub. L. 99–514section 414 of this titleAmendment by applicable to years beginning after , see , set out as a note under .

section 1151(g)(2) of Pub. L. 99–514section 1151(k) of Pub. L. 99–514section 79 of this titleAmendment by applicable, with certain qualifications and exceptions, to years beginning after , see , as amended, set out as a note under .

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title V, § 532(b)98 Stat. 887 Pub. L. 99–514, § 2100 Stat. 2095

“The amendment made by this section [amending this section] shall apply to qualified tuition reductions (as defined in section 117(d)(2) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) for education furnished after , in taxable years ending after such date.”
, , , as amended by , , , provided that:

section 127(c)(8) of this titlesection 1(g)(5) of Pub. L. 98–611section 127 of this titleProvisions of subsec. (d) treated as in effect on and after , in case of education described in , see , set out as a note under .

Effective Date of 1980 Amendment

Pub. L. 96–541, § 5(a)(2)94 Stat. 3206

“The amendment made by paragraph (1) [amending this section] shall apply to taxable years beginning after .”
, , , provided:

Effective Date of 1976 Amendment

Pub. L. 94–455section 1901(d) of Pub. L. 94–455section 2 of this titleAmendment by applicable with respect to taxable years beginning after , see , set out as a note under .

Effective Date of 1961 Amendment

Pub. L. 87–256, § 110(h)(1)75 Stat. 537

“The amendments made by subsections (a), (b), and (c) of this section [amending this section and sections 871 and 872 of this title] shall apply to taxable years beginning after .”
, , , provided that:

Regulations

section 1114 of Pub. L. 99–514section 1141 of Pub. L. 99–514section 401 of this titleSecretary of the Treasury or his delegate to issue before , final regulations to carry out amendments made by , see , set out as a note under .

Section 1151 of Pub. L. 99–514Nonenforcement of Amendment Made by for Fiscal Year 1990

Pub. L. 101–136section 1151 of Pub. L. 99–514section 528 of Pub. L. 101–136section 89 of this titleNo monies appropriated by to be used to implement or enforce or the amendments made by such section, see , set out as a note under .

Public Law 99–514Applicability of Certain Amendments by in Relation to Treaty Obligations of United States

section 123(a) of Pub. L. 99–514Pub. L. 100–647Pub. L. 99–514Pub. L. 100–647section 861 of this titleFor nonapplication of amendment by to the extent application of such amendment would be contrary to any treaty obligation of the United States in effect on , with provision that for such purposes any amendment by title I of be treated as if it had been included in the provision of to which such amendment relates, see section 1012(aa)(3), (4) of , set out as a note under .

Plan Amendments Not Required Until January 1, 1989

Pub. L. 99–514section 1140 of Pub. L. 99–514section 401 of this titleFor provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after , see , as amended, set out as a note under .

Transitional Rules for Treatment of Certain Reductions in Tuition

Pub. L. 99–514, title XVIII, § 1853(f)100 Stat. 2872

“(1)
A tuition reduction plan shall be treated as meeting the requirements of section 117(d)(3) of the Internal Revenue Code of 1954 [now 1986] if—
“(A)
such plan would have met the requirements of such section (as amended by this section but without regard to the lack of evidence that benefits under such plan were the subject of good faith bargaining) on the day on which eligibility to participate in the plan was closed,
“(B)
at all times thereafter, the tuition reductions available under such plan are available on substantially the same terms to all employees eligible to participate in such plan, and
“(C)
the eligibility to participate in such plan closed on , , or .
“(2)
For purposes of applying section 117(d)(3) of the Internal Revenue Code of 1954 [now 1986] to all tuition reduction plans of an employer with at least 1 such plan described in paragraph (1) of this subsection, there shall be excluded from consideration employees not included in the plan who are included in a unit of employees covered by an agreement that the Secretary of the Treasury or his delegate finds to be a collective bargaining agreement between employee representatives and 1 or more employers, if, with respect to plans other than plans described in paragraph (1), there is evidence that such benefits were the subject of good faith bargaining.
“(3)
Any reduction in tuition provided with respect to a full-time course of education furnished at the graduate level before , shall not be included in gross income if—
“(A)
such reduction would not be included in gross income under the Internal Revenue Service regulations in effect on the date of the enactment of the Tax Reform Act of 1984 [], and
“(B)
such reduction is provided with respect to a student who was accepted for admission to such course of education before , and began such course of education before .”
, , , provided that:

National Research Service Awards

Pub. L. 95–600, title I, § 161(b)92 Stat. 2810 Pub. L. 96–167, § 9(b)93 Stat. 1278 Pub. L. 96–541, § 5(b)94 Stat. 3206 Pub. L. 97–248, title II, § 28596 Stat. 569 Pub. L. 99–514, § 2100 Stat. 2095 l–, , , as amended by , , ; , , ; , , ; , , , provided that any amount paid to, or on behalf of, an individual as a national research service award under former section 2891 of title 42 during calendar years 1974 through 1983 was to be treated as a scholarship or fellowship grant under this section.

Scholarship Programs for Members of the Uniformed Services

Pub. L. 93–483, § 488 Stat. 1458 Pub. L. 94–455, title XXI, § 213090 Stat. 1922 Pub. L. 95–171, § 591 Stat. 1355 Pub. L. 95–600, title I, § 161(a)92 Stat. 2810 Pub. L. 95–615, title I, § 692 Stat. 3098 Pub. L. 96–167, § 9(a)93 Stat. 1278 Pub. L. 99–514, § 2100 Stat. 2095

“(a)

In General.—

section 170(b)(1)(A)(ii) of this titleAny amount received from appropriated funds as a scholarship, including the value of contributed services and accommodations, by a member of a uniformed service who is receiving training under the Armed Forces Health Professions Scholarship Program (or any other program determined by the Secretary of the Treasury or his delegate to have substantially similar objectives) from an educational institution (as defined in section 151(e)(4) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) [see ] shall be treated as a scholarship under section 117 of such Code [this section], whether that member is receiving training while on active duty or in an off-duty or inactive status, and without regard to whether a period of active duty is required of the member as a condition of receiving those payments.
“(b)

Definition of Uniformed Services.—

section 101(3) of title 37For purposes of this section, the term ‘uniformed service’ has the meaning given it by , United States Code.
“(c)

Effective Date .—

The provisions of this section shall apply with respect to amounts received during calendar years 1973, 1974, and 1975, and, in the case of a member of a uniformed service receiving training after 1975 and before 1981 in programs described in subsection (a), with respect to amounts received after 1975 and before 1985.”
, , , as amended , , ; , , ; , , ; , , ; , , ; , , , provided that:

Section 6 of Pub. L. 95–615§ 4(c) of Pub. L. 93–483section 210(a) of Pub. L. 95–615section 61 of this title[, which reenacted without change, to cease to have effect on the day after , see , set out as a note under .]