If the non qualified portion of scholarships are taxable to scholarship holder, are all the athletic scholarship athletes subject to large tax bills especially if they receive a scholarship to a private college?
For purposes of whether scholarships are tax-free under Sec. 117 of the IRC, athletic scholarships are treated no differently than any other scholarship. As long as the scholarship funds are used to pay for qualified educational expenses, they would be tax-free. Qualified educational expenses do NOT include room, board, travel and any other type of living expense. Qualified educational expenses DO include tuition, fees, books, supplies and equipment required to either attend the school or take a course.
The above assumes that the student meets the other requirements of the law such as being a candidate for a degree and attending an eligible educational institution.
That's my point, with all the NCAA restrictions, how can a lot of the athletic scholarship winners pay their taxes due because of rules.
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