Contents Important Reminders  ......................... 1 Introduction  ........................................ 1 Scholarships and Fellowships  ......... 2 Qualified Tuition Reduction  .............. 4 Individuals Abroad  ............................. 4 Reporting Income   ........................... 4 Deducting Expenses  ....................... 5 Payment of Foreign Taxes  ............. 5 Payment of U.S. Income Tax  ......... 5 Estimated Tax  ..................................... 5 How To Get More Information  .......... 6 Index  .................................................... 7 Important Reminders Estimated tax.    You may have to pay esti- mated tax if the grantor of a scholarship or fellowship does not withhold tax or withholds insufficient  tax  on  the  taxable  part  of  your scholarship or fellowship grant. For more in- formation, see Estimated Tax, later. Dependent student.    If you can be claimed as a dependent on another person's return, the following special rules apply. 1)   You cannot claim an exemption for yourself on your tax return. 2)   Your standard deduction is generally limited. For  more  information,  see  Publication  501, Exemptions, Standard Deduction, and Filing Information. Individual retirement arrangements (IRAs). You can set up and make contributions to an IRA  if  you  received  taxable  compensation. Under this rule, a taxable scholarship or fel- lowship is compensation only if it is shown in box 1 of Form W-2, Wage and Tax Statement. For more information about IRAs, see Publi- cation   590,   Individual   Retirement   Arrange- ments (IRAs). Introduction This publication covers the rules for scholar- ships,   fellowships,   and   tuition   reductions. These amounts are tax free if they meet the rules discussed in this publication. This publication also discusses the esti- mated tax rules and some of the special rules that apply to U.S. citizens and resident aliens who  are  studying,  teaching,  or  researching abroad under scholarships and fellowships. This publication does  not  discuss certain items that are covered in other publications. These include: •  Student loans that were canceled or for- given. See Publication 525, Taxable and Nontaxable Income. •  Scholarships and fellowships paid to nonresident aliens. See Publication 519, U.S. Tax Guide for Aliens. Department of the Treasury Internal Revenue Service Publication 520 (Rev. April 1998) Cat. No. 15024E Scholarships and Fellowships Get forms and other information faster and easier by:    COMPUTER • World Wide Web ä www.irs.ustreas.gov • FTP ä ftp.irs.ustreas.gov • IRIS at FedWorld ä (703) 321-8020    FAX • From your FAX machine, dial ä (703) 368-9694 See How To Get More Information in this publication.