Per the IRS Fulbright Grants webpage:
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:
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.
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 2022 and will receive two grant checks in tax year 2022 and two grant checks in tax year 2023. For tax year 2022, figure the income tax liability only on the amount of taxable grant funds received in calendar year 2022. For tax year 2023, figure the income tax liability only on the amount of taxable grant funds received in calendar year 2023.
A Fulbright grantee, who begins a grant in January 2023, will usually receive the first check in December 2022 and thereby incurs an income tax liability for 2022.
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 report your Fulbright Scholarship in the TaxAct program, go to our Form 1098-T - Entering Scholarship Fellowship Income in Program FAQ or our Form 1098-T - Tuition Statement Not Received FAQ.
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 gross amount of the grant as wages on Line 7 of Form 1040 – even if you never received a Form W-2 from the Fulbright agency which paid you the grant.
The TaxAct program does not 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 grant as wages in the TaxAct program, go to our Instructions to Enter Form W-2 Information FAQ; enter the amount of your Fulbright grant in Box 1 and leave 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 webpage or document at the time it is accessed.