*Explanation

Recipients of Prizes and Awards are typically selected through a contest or competition, or in recognition of some sort of charitable, scientific, educational, artistic, literary, or civic achievement, and are not restricted to educational purposes.

Though not related to employment services, a prize or award is generally taxable income to the recipient regardless of the funding source. Typically, no restrictions are placed on how the student can use the award money. If restrictions are imposed (e.g., the donor stipulates that funds must be used for education expenses, travel, or room and board), then the payments are no longer considered prizes or awards, and must be processed as scholarships or educational assistance grants. See Scholarships, Fellowships and Educational Assistance Grants. If the source of the prize or award is gift funds, the donor of the prize or award may set the criteria for recipient selection, but may not select the recipient.