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Tax Relief for Students: Pell Grant and American Opportunity Credit

This act aims to make higher education more accessible by changing tax rules. Students receiving federal Pell Grants will no longer have to pay taxes on them. Additionally, the American Opportunity Tax Credit will be expanded to cover more expenses, potentially lowering education costs for many families.
Key points
Pell Grants are now tax-free, meaning more money for students to cover educational expenses.
The American Opportunity Tax Credit now covers more expenses, including computer equipment, software, internet access, and child or dependent care costs related to education.
There's a $1,000 annual limit for computer equipment and internet expenses under the credit.
These changes apply to tax years beginning after December 31, 2020.
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Additional Information
Tax-Free Pell Grant Act
Print number: HR 4173
Sponsor: Rep. Doggett, Lloyd [D-TX-35]
Process start date: 2021-06-25