Are Pell Grants taxable?

by Allie
(LA)

I am going to get the maximum Pell grants award. Do I have to pay taxes on any or all of it, or are federal Pell awards tax-free?

ANSWER: Some of the award may be taxable, depending on your situation. Any part of Pell grants that are used to pay what is called "qualified educational expenses", is tax-free. These expenses include:

• tuition


• fees required for enrollment


• any expenses that are related to the courses you are taking- for instance: books, supplies (like a lab coat) or equipment (such as a computer or a calculator, if it is required)

Qualified expenses need to be things that are required for all students in your class- not just for you, even if it is something that YOU need in order to attend school. So, if you paid for extra tutoring using grant money, you would need to pay taxes on that portion.

Room, board, transportation are not considered qualified educational expenses, even though they are considered part of your school's cost of attendance when it comes to your FAFSA EFC. Also remember, that you cannot collect a college tax credit for paying college expenses with tax-free money. Your school will report the amount paid for tuition and fees (and in some cases books, if bought at the school bookstore with a voucher) to the IRS and you will be sent a copy of the information they supplied.