March 3, 2022 10:56 pm

Emergency Aid Grants to Students Are Tax Free

Emergency financial aid grants made by a federal agency, state, Indian tribe, higher education institution or scholarship-granting organization (including a tribal organization) to a student because of an event related to the COVID-19 pandemic are not included in the student’s gross income (IR-2021-70). Because these grants are not includible in gross income, they aren’t reported to students on Forms 1099 (FAQs on Higher Education Emergency Grants #9, added by Fact Sheet FS-2022-11).

But if the institution is using federal funds to cancel or discharge overdue balances for tuition and fees, the debt is being paid by the federal government and such payment generally would be included in gross income.  But due to a special rule, debts paid by the Federal government in response to the COVID-19 pandemic, including grants used to pay an overdue balance for tuition and fees owed to the institution, are not included in gross income (FAQs on Higher Education Emergency Grants #8, added by Fact Sheet FS-2022-11).

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Tax Glossary

Condemnation

The seizure of property by a public authority for a public purpose. Tax on gain realized on many conversions may be deferred.

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