Do You Have to Report Pell Grant Money on Taxes?

Print Friendly

Receiving a Pell grant award as part of your federal student aid package can really reduce, or even eliminate, the hefty financial burden of making tuition payments to your college or university. Though uncommon, in some cases, the IRS may require that you report the Pell grant award on your tax return. However, by following a few simple rules, you can easily avoid this situation and receive the Pell grant tax free.

Pell Grant Taxation

Unlike student loans, a Pell grant is free money from the government – but you can only use it to finance certain school expenses at one of 5,400 higher education institutions. When it comes to your taxes, however, the IRS treats your Pell grant as a scholarship, which means it’s possible that you’ll have to report the grant money on your tax return and maybe even pay income tax on it.

Tax-Free Pell Grants

In order to avoid having to report your Pell grant on a tax return, you must satisfy two IRS requirements that actually apply to all types of scholarships – not just Pell grants. First, you must be enrolled in as a degree candidate or be pursuing a training program that prepares you for a specific profession upon completion. And second, you must only use the Pell grant funds to pay “qualified education expenses.”

Qualified Education Expenses Definition

Page 1 of 2 | Next page