This bill expands tax benefits for Pell Grants, which are federal financial aid awards for low- and middle-income college students. Currently, Pell Grants are only tax-free when used for qualified education expenses like tuition and fees; under this bill, Pell Grants would be completely excluded from a student's taxable income regardless of how the funds are spent. The legislation also prevents Pell Grant recipients from having to reduce education tax credits (like the American Opportunity Credit) based on their Pell Grant amounts. The changes would take effect for tax years beginning after December 31, 2025, meaning students filing taxes in 2026 and beyond would benefit from this expanded exclusion. No specific funding is allocated in the bill, as it primarily modifies existing tax code provisions.
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