Tax-Free Pell Grants and Expanded Education Tax Credits
This act aims to make higher education more affordable by exempting Pell Grants from income tax. It also broadens the types of expenses eligible for education tax credits, such as the American Opportunity and Lifetime Learning Credits, to include items like computer equipment and childcare, potentially reducing the financial burden on students and families.
Key points
Pell Grants will no longer be considered taxable income, meaning more financial aid for students.
The list of eligible expenses for education tax credits has been expanded to include computer equipment, software, internet access, and child and dependent care expenses, potentially lowering out-of-pocket costs for students and families.
These changes apply to tax years beginning after December 31, 2020.
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