A Guide to Navigating Tax Implications of Entrepreneurial Scholarships

Starting a business is an exciting yet daunting prospect. Fortunately, many entrepreneurs are eligible for scholarships that can help cover the costs associated with getting a business up and running.

However, as with any form of income, there are tax implications to consider when receiving an entrepreneurial scholarship—and understanding these implications is key to staying on the right side of the law. Read on to learn more about how taxes apply to entrepreneur scholarships, explained by Richard Zahn.
Taxable Vs. Non-Taxable Scholarship Funds
The first step in navigating tax implications related to entrepreneur scholarships is understanding which types of funds are taxable and which are not. Generally speaking, scholarship funds used for tuition, fees, books, supplies, or equipment required for courses at an educational institution do not have to be reported as income and are, therefore, non-taxable. In contrast, funds provided for living expenses (including food and housing) typically must be reported as income and will be subject to taxes.
Reporting Scholarship Income on Your Tax Return
If you receive scholarship funds that must be reported as income (i.e., taxable funds), you’ll need to report that money on your tax return using IRS Form 1040 or 1040-SR.

On this form, you’ll need to enter your total scholarship income under “Wages, salaries, tips” or “Statutory employee income”; if it’s greater than $400 in value, you’ll also need to include Schedule SE (Self-Employment Tax).
Tax Deductions & Credits Available To Entrepreneurs
It’s important to understand all available deductions and credits available that could help reduce the amount of taxes due at the end of the year. The most common deductions available when starting a business include office supplies and equipment purchases made throughout the year, travel expenses related solely to business activities (not personal trips), rent payments made towards office space or storage units used exclusively by the business venture, etc.
With this knowledge in hand – Richard Zahn will be well prepared for success when embarking upon their entrepreneurial journeys!