How to Determine the Taxable Amount of a Pell Grant
Getting scholarships and grants can make college much more affordable. The federal government offers the Pell Grant to financially needy students. Unlike a loan, you never have to repay a Pell Grant. However, if your scholarships and grants exceed your qualifying expenses, you have to report that amount as taxable income when you file your income taxes. Qualifying expenses include tuition and mandatory fees but not room and board. If you are not a degree-seeking student, your entire Pell Grant is taxable.
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Instructions
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Add the cost of your tuition, required fees and any supplies you must purchase through the school for your class if you are a degree candidate. Supplies include only items required of all students in the class, such as books or lab equipment. For example, if you have $4,000 in tuition and $500 in fees, your total qualifying expenses equals $4,500.
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Add the value of all of your scholarships and grants, including your Pell Grant. For example, if you have a $5,000 Pell Grant and a $1,000 scholarship, your total aid equals $6,000.
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Subtract your qualifying expenses from your total scholarships and grants, including your Pell Grant, to figure out your taxable scholarship income. If your scholarships and grants do not exceed your qualifying costs, none of your Pell Grant is taxable. In this example, subtract $5,000 from $6,000 to find that you have to report $1,000 of scholarship income.
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