Per Internal Revenue Service (IRS) Publication 515, scholarships from U.S. sources, paid to a candidate for degree, and spent for the following purposes are qualified scholarships:
- Tuition and fees required for enrollment or attendance at an educational organization, and
- Fees, books, supplies, and equipment required for courses of instruction at the educational organization.
Qualified scholarships paid to nonresident alien (NRA) students are not reportable and not subject to tax withholding. However, the portion of a U.S. Source scholarship paid to a nonresident alien which is not for any of the purposes stated above is classified as a nonqualified scholarship, reportable on IRS Form 1042-S and subject to 14% federal income tax withholding. Examples of a nonqualified scholarship are the portion of a scholarship devoted to travel, room and board, and other living expenses.
More information can be found: https://www.irs.gov/forms-pubs/about-form-1042-s