if my Pell grant exceeded my tuition, am I taxed on what is left?
My Pell grant exceeded my tuition. On what can I spend the excess? Do I have to report this excess on my income taxes?
Answer:
I'm not a tax professional, but I will try to explain the requirements as I understand them. A lot depends on your individual situation. What confuses most people is that the things you are allowed to spend a Pell grant on as far as education law, are not necessarily things that are exempt from taxes.
You are basically allowed (under the education laws) to spend the excess money on anything that is necessary for you to attend college. That might include transportation or child care, for instance.
But if you spend Pell grant money on those things, that portion would be taxable. The only things you can spend excess Pell grant money on, without paying taxes on it, are things that are required by your school for every student taking the same courses:
fees
equipment
books
supplies
So, by law, you can spend Pell grant money on a computer- that is an allowable education expense for federal financial aid- but unless your school specifies that a computer is required for one of your courses, you would have to pay income tax for the portion of grant money that was spent on it. If it was required by your school, then you would not have to pay income tax on that portion.
