The Tax Treatment of ROTC Payments

The Reserve Officer Training Corps trains college students to become officers in the U.S. Army, Navy or Air Force. Students in the ROTC program receive scholarship assistance for tuition, books and fees and a subsistence stipend to help with living expenses. Most of these ROTC student payments are tax-exempt.

The Internal Revenue Service says that ROTC scholarship assistance is not taxable if the student is a candidate for a degree from the college or university and the scholarship money is used to pay for tuition, fees, books, equipment and supplies for school. If you use ROTC scholarship money for living expenses, however, you may have to include that amount in your gross income.

The ROTC program's military courses are taken in addition to the civilian courses that lead to a degree. Nonetheless, tuition money that goes to the ROTC courses is still tax exempt. The ROTC military curriculum covers military law, the laws of war and military customs. The curriculum also covers skills in communications, leadership and management as they relate to military service, as well as the organization and employment of military forces.

Students on an ROTC scholarship also receive an ROTC subsistence stipend from the military to help them pay for their room and board, meals, transportation and everyday living expenses. Depending on the military service program and your college year, the ROTC living-expense stipend ranges from $300 to $500 per month. The IRS says these subsistence payments are tax-exempt and need not be reported on the student's tax return.

The ROTC program requires that students participate in weekend military exercises and summer advanced training camps. Students receive active-duty military pay for these activities. This is taxable income that must be reported on the student's tax return. A student who received tuition, books and fees on an ROTC scholarship, plus $3,000 for living expenses and $600 in military pay during the year would include only $600 in his gross income.