The Internal Revenue Service (IRS) in a notice posted this week made clear that emergency financial aid grants received by students due to the coronavirus pandemic will not be counted as taxable income. This applies to any grant a student receives from a federal agency, state, Indian tribe, higher education institution, or scholarship-granting organization.
Additionally, if a student used a portion of their emergency aid grant for qualified tuition and related expenses in 2020, they may be eligible to claim a tuition and fees deduction or receive the American Opportunity Credit or Lifetime Learning Credit on their tax return, according to the IRS.
Institutions also won’t be required to send additional tax forms to the students or to the IRS to report these grants due to the fact the funds won’t be included in taxable income, the IRS added.
Publication Date: 4/1/2021