(Last updated: 22 Feb 2023)
Many athletes dream of having an opportunity to move to the US on a sports scholarship and study in one of their world-famous universities. If you are good enough to have been offered a scholarship, here’s what you need to know about taxes!
Studying in the US is expensive and while most universities offer scholarships and many accept applications from international students. Over 600 US universities offer $20,000 worth of scholarships to international students.
Are athletic scholarships taxable?
If you are an international student, in the US on a sports or athletic scholarship you are most likely considered a nonresident and you’re legally obliged to file a federal tax return even if you have received even $0.01.
You may also be obliged to file a state tax return, depending on your personal circumstances.
That’s right! And you could get in a lot of trouble if you don’t file. This can affect your ability to return to the US or complete your studies. It takes a lot of hard work and dedication to achieve a sports scholarship. Why ruin it by failing to file your taxes?
Read more: How to report stipend and scholarship income on your tax return
If you’re on a sports scholarship in the US, here are some tax tips from Sprintax:
Do college athletes pay taxes on sports scholarships?
Athletic scholarships are the same as any other scholarship, so tuition and textbooks are tax-free, so long as they are required for the course of study and related to education.
However, any additional payments you will have to pay tax on.
These non-qualifying expenses include things like room and board fees.
When is a sports scholarship tax-free?
The determining factor on whether or not a sports scholarship will be deemed tax-free is the designation of the expense.
For example, if you are an athlete whose scholarship is designated towards tuition and accommodation, then only the tuition part will be tax-free.
The same goes for if there is no designation for the scholarship – it depends on what the athlete chooses to do with the money.
If the scholarship fees go fully towards tuition, it’s all tax-free. However, if 70% goes towards tuition and 30% goes towards accommodation, then 30% will be taxed.
In addition, taxable scholarships (room, board and other individual expenses) may be exempt under tax treaty agreements between the home country of the student and the US.
How do I report scholarships on my tax return?
If you received a scholarship then you will need Form 1042-S in order to complete your tax return.
You should receive this from the payroll at your university.
What forms must I file for my US tax return?
To file a fully compliant tax return, you must make sure you are submitting the correct forms.
1. If you had no U.S. income
Even if you have earned nothing during your time spent in the US, you must file a Form 8843 with the IRS.
2. If you had any U.S. income
If you did receive money while in the US during the tax year, you will have to file a Federal Tax Return in addition to your Form 8843.
Depending on your personal situation, you may also have to file a State Tax Return. Sprintax is the only online tax preparation software that covers both Federal and State tax prep for nonresidents in the US – so don’t worry, we can help you find out what forms you must file.
Prepare your US tax return online with Sprintax Returns
Residency status
How do I know what my residency status is?
This is very important.
It is not possible to file a fully compliant tax return without knowing your residency status.
The two most common tax residency statuses are: nonresident and resident.
If you are an international student in the US on an F, J, M or Q visa – you are most likely considered a nonresident alien for tax purposes.
If you’re unsure of your residency status, Sprintax will help you figure that out too.
What will I need in order to file my US tax return as an international student?
- Passport
- Visa/immigration status information – this includes Form DS-2019 (for J visa holders) or a Form I-20 (for F visa holders)
- Income forms – W2 Form, 1042-S and/or 1099
- Social security number (SSN) or Individual Taxpayer Identification Number (ITIN).
- If you filed a tax return with the IRS last year, you will need a copy of that tax return.
If you don’t have an ITIN, Sprintax can help you apply for one.
Not sure if you need it? Watch this short video and find out!
Make sure you have all the right documents. The sooner you start preparing, the better – that way you can contact employers if you haven’t received your payment documents for example.
Did you receive NIL income during the tax year?
Read our guide on how NIL income affects the taxation of nonresident student athletes in the US.
When should I start preparing my US tax return?
It’s never a good idea to leave important things like tax filing until the last minute. Filing on time also means you can receive your tax refund sooner!
In 2023, the tax deadline falls on 18 April but you should prepare your documents in advance so that everything runs smoothly.
Need help filing your taxes?
Filing taxes is challenging but Sprintax offer a service that makes preparing your tax return easy! If you’re on a sports scholarship and you’d like help with getting your tax return ready for filing season, contact us today.
Prepare your international student tax return online with Sprintax.
