IRS: COVID-19 Emergency Aid Grants to Students Are Not Taxable

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

David S | 4/1/2021 3:12:09 PM

A lot of us had emergency aid programs in place pre-COVID, and while the pandemic certainly increased the volume of requests and funds awarded, not all emergency aid is COVID-related, regardless of when it was awarded. Student's laptop dies and has to be replaced...not a COVID thing. Does anyone think that the IRS is going to dig so deep as to look into whether or not schools differentiate between COVID-related and non COVID-related emergency aid?

I sure hope I'm overthinking this. Given that the US Treasury acknowledges that it will lose $7.5 trillion - with a tr - over the next decade thanks to underreported income, I hope the IRS isn't losing sleep over the taxability of a student's $1000 emergency grant.

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