Pell Grant

[Questionguy101]

I have always thought Pell Grant is taxable if it is not used to pay for qualified education expenses.So what they said in this article really surprised me.

http://www.ehow.com/info_10070474_put-pell-grant-tax-return.html

And below is an extract of the article:

"Do I Have to Put My Pell Grant on My Tax Return?
By Donald Harder, eHow Contributor | updated August 16, 2011

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Like student loans, Pell Grant money is not income that must be reported.
Paying for college can be expensive. If you have a low income, the costs can be almost insurmountable. The Pell Grant is a federal program that provides college money to people the government classifies as low-income. If you qualify for a Pell Grant, the money you receive can help offset some of your education costs. Pell Grant money is considered student aid, which is not taxable.

(skip a paragraph)

Tax Filing
If the only money you received over the past year came from the federal Pell Grant program or in the form of other student aid, such as student loans, you do not need to file a tax return for the year. If you earned other income that is taxable requiring you to file an income tax return, you do not need to include Pell Grant money you received on your return."


So, in the article, they explicitly said that "Pell Grant is not taxable" and "you do not need to include Pell Grant money you received on your return". Is it correct?

I also have a client who attends a community college and receives Pell Grant. He has received a Form 1098-T for year 2011. On the form, the school does not put the Pell Grant amount that he has received in box 5 "Scholarships or Grants". So it looks like the school agrees with what they said in the article. I am really confused now.

[Gary2]

Is "eHow Contributor" a new designation to replace RTRP or EA?

[Gretel]

Pub 970

This is from Pub 970:

Pell Grants and Other Title IV Need-Based Education Grants

These need-based grants are treated as scholarships for purposes of determining their tax treatment. They are tax free to the extent used for qualified education expenses during the period for which a grant is awarded. Report only the taxable amount on your tax return. See Reporting Scholarships and Fellowships on this page.

[dkss]

I agree with Gretel. The pubs are clear about when grants are and are not taxable.

I would say the eHow contributor probably got his info from his barber or auto mechanic, or even a misinformed college administrator. The misconceptions we have to set straight can be mind boggling.