If you're a low-income undergraduate student, a Pell Grant can provide financial assistance that you don't have to pay back. However, the federal government places strict requirements on qualifying for Pell Grants. There are also limits on how much money you can receive. Depending on what you use your Pell Grant for, you may also have to declare at least part of your grant as income on your federal tax return.
Are Pell Grants Taxable?
If you use your Pell Grant to pay tuition, books or required charges like lab fees, your grant is tax free. However, if you use part or all of your Pell Grant for room and board, you have to report that portion of your Pell Grant on your federal income tax return. If you receive a Pell Grant and a student loan, you can choose to apply the money from your loan to room and board and use the Pell Grant for tuition and books so that the Pell Grant remains tax free.
Can You Claim an Education Tax Deduction if You Used a Pell Grant to Pay?
You can't deduct the amount of tuition that you pay with your Pell Grant from your federal income tax return. If you attend a school with high tuition and your Pell Grant doesn't cover all of it, you might take a student loan to cover the remaining cost. You can deduct the interest that you pay on the loan from your federal income tax return. Up to $4,000 in tuition and fees that you pay "out of pocket," including with guaranteed student loans, can also be deducted from your federal income taxes. However, you cannot claim the tuition and fees credit if you receive a Hope or Lifetime Learning Credit. You also cannot claim these deductions if your status is married filing separately or if you can be claimed as a dependent on someone's federal income tax return.
Can a Married Woman Get a Pell Grant for Schooling?
Pell Grants are available to students who are single or married. In fact, depending on how much money you and your spouse make, it may actually be easier to qualify for a Pell Grant. That's because married students count as independent students when filling out the Free Application for Federal Student Aid, the main application form for federal student aid programs. Independent students don't have to provide information about their parents' income or assets. As a result, your Expected Family Contribution might be lower than it would be if you had to provide your parents' income and assets.
What Is the Maximum Income a Family Can Make for a Person to Qualify for a Pell Grant?
Family income is one of several factors that determine whether you are eligible for a Pell Grant. Each year, the federal government sets a maximum Expected Family Contribution to qualify for Pell Grants, based on the family's income compared with its expenses, including number of enrolled college students. As of 2012, a large family may qualify for a Pell Grant with an annual income as high as $60,000 per year, especially if there is more than one enrolled undergraduate student. Most families that are eligible for Pell Grants have incomes that average less than $25,000 per year.
Can You Get Tax Credits if You Receive a Pell Grant?
Receiving a Pell Grant does not disqualify you from receiving other tax credits. If your tuition exceeds the amount of your Pell Grant, you may receive a Hope Credit of up to $2,500 for up to two years of undergraduate study. If you do not claim the Hope Credit, you may claim up to $2,500 through the American Opportunity Credit; up to $1,000 of the credit is refundable, even if you don't owe federal income tax. A third option is the Lifetime Learning Credit, which allows you to claim between $2,000 and $4,000 for every year you are enrolled in either graduate or undergraduate courses. You can only claim one of these three credits on a single tax return.
- U.S. Department of Education: Federal Pell Grant Program
- Internal Revenue Service: Taxable Income for Students
- Internal Revenue Service: Topic 456 -- Student Loan Interest Deduction
- Internal Revenue Service: Topic 457 -- Tuition And Fees Deduction
- Military.com: Deduct Up to $4,000 in Education Expenses
- FinAid: IRS Dependency Tests
- FastWeb: FAFSA and the Independent Student
- PellGrantEligibility.net: Are There Pell Grant Income Limits?
- PellGrantEligibility.net: Determining Eligibility for the Federal Pell Grant Program
- Internal Revenue Service: Five Ways to Offset Education Costs
- Internal Revenue Service: Publication 970 (2011), Tax Benefits for Education
- Internal Revenue Service: EITC Home Page
- Bankrate.com: Earned Income Tax Credit Could Pay Off
- Internal Revenue Service: American Opportunity, Hope and Lifetime Learning Education Credits
- Military.com: Get Up to $2,000 in Education Tax Credits
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