My daughter received a couple thousand dollars in scholarships that were written directly to her and not the school. We have put that money in a savings to help cover books and future school expences. I expect she has to show that as income since she has not yet paid it to the schools. But is there a savings she can put it in to shelter it until she pays it out?
Thank you in advance for your help.

What is a Scholarship?
A scholarship generally is an amount paid for the benefit of a student at an educational institution to aid in the pursuit of studies. The student may be in either a graduate or an undergraduate program.

The IRS has stated that if you are a candidate for a degree, you generally can exclude from income that part of the grant used for:

1. Tuition and fees required for enrollment or attendance, or
2. Fees, books, supplies, and equipment required for your courses.

But, a taxpayer cannot exclude from income any part of the grant used for other purposes, such as room and board. Thus, it appears the amount your daughter has received as a scholarship can generally be all excluded from income provided that your daughter uses the scholarship money for qualified education purposes as mentioned above 1) and 2).

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