Per the IRS Fulbright Grants website:

Fulbright grants received by a U.S. citizen from an agency which dispenses and administers Fulbright grants (domestic or foreign) fall into two types of income for tax purposes. If you are a U.S. citizen recipient of a Fulbright grant, you must determine which category of income your grant falls into in order to know how the grant is taxed for U.S. Federal Income tax purposes.

Fulbright grants may be either scholarship/fellowship income or compensation for personal services, which is usually considered wages.

For tax purposes, a scholarship/fellowship may be defined as an amount given to an individual which has the following characteristics:

1. It is paid to aid the individual's pursuit of study, training, or research;
2. It does not constitute compensation for personal services - past, present, or future; and
3. It is paid more for the benefit of the grantee than the grantor.

For tax purposes, compensation for personal services represents an amount paid to an individual in exchange for his performance of personal services - past, present, or future. Compensation for personal services usually takes the form of either wages or self-employment income.

When to Report a Fulbright Grant

Taxable Fulbright grant payments are reportable in the year in which they are received. For example, a Fulbright grantee with a ten-month grant who begins the grant in September 2019 and will receive two grant checks in tax year 2019 and two grant checks in tax year 2020. For tax year 2019, figure the income tax liability only on the amount of taxable grant funds received in calendar year 2019. For tax year 2020, figure the income tax liability only on the amount of taxable grant funds received in calendar year 2020.

A Fulbright grantee, who begins a grant in January 2020, will usually receive the first check in December 2019 and thereby incurs an income tax liability for 2019.

How to Report a Fulbright Grant as a Scholarship/Fellowship

If your Fulbright grant is scholarship/fellowship income as described above, then you should report the income as wages on the appropriate line of Form 1040 and add the note “SCH” in the margin next to the line. If you are reporting wage income from another source on the same line, simply add the amount of the Fulbright scholarship/fellowship income to the wage income also shown on that line.

If you were a candidate for a degree, and your study, training, or research performed under the Fulbright grant was a part of your pursuit of a degree, then you may deduct from your taxable Fulbright grant income any amounts you spent on (1) tuition, (2) fees, (3) books, (4) supplies, and (5) equipment required for your courses. You should attach a schedule to your Form 1040 itemizing your gross Fulbright grant income, less these 5 deductions, in order to arrive at a net taxable amount of the grant. This net taxable amount should be reported on the line for wages on Form 1040.

To enter your Fulbright Scholarship:

1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
2. Click Education in the Federal Quick Q&A Topics menu to expand, then click Student Worksheet (tuition, scholarships).
3. Click + Add Student Information to create a new copy of the worksheet or click Edit to review a worksheet already created.
4. Continue with the interview process to enter all of the appropriate information.
5. On the screen titled Student Information - Qualifications, check all the applicable boxes for this student, then click Continue.
6. On the screen titled Student Information - Educational Institution, if the scholarship or grant amount is reported on Form 1098-T, select Yes on the applicable questions, then click Continue.
7. On the screen titled Student Information - Education Assistance, enter the amount of the scholarship or fellowship in the applicable fields, then click Continue.
8. On the screen titled Student Information - Scholarship Income, enter the portion of that scholarship income that was used for the purposes mentioned, then click Continue.

On the screen titled Student Information - Summary of Scholarship Income, you will see the Taxable scholarship income amount and/or Tax-free scholarships, grants, etc. amount.

If your Fulbright grant is wages because you performed lecturing or teaching services as a condition for receiving the Fulbright grant, then you should report the entire gross amount of the grant as wages on Line 7 of Form 1040 U.S. Individual Income Tax Return – even if you never received a Form W-2 Wage and Tax Statement from the Fulbright agency which paid you the grant.

TaxAct does not currently support direct entry of a Fulbright grant as wages. It is necessary to enter the amount as if a W-2 had been received. You would have to paper file the return in this situation.

To enter the Fulbright as wages in the TaxAct program, see Entering in Program - Form W-2.

Enter the amount of your Fulbright grant in Box 1. Leave all of the other boxes blank.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.