Emergency Student Aid Grants Will Not Be Taxed; House Bill Would Give Additional Relief to Students and Families
May 11, 2020

The IRS announced last week that CARES Act emergency student financial aid grants will not be taxable.

In an FAQ posted on its website, the agency said CARES Act grants are “qualified disaster relief payments under section 139 of the Internal Revenue Code” and should not be included as part of gross income. ACE sent a letter April 21 asking House and Senate leaders to address this issue.

ACE, along with 15 other associations, is also strongly endorsing a new bill introduced by Rep. Lloyd Doggett (D-TX) to help students during the COVID-19 crisis and make important temporary changes and permanent reforms to the American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC).

The American Opportunity Student Tax Relief Act of 2020 would temporarily increase the AOTC to $3,000 and make it easier for students in lower-tuition programs to get the full $2,000 under the LLC.

For the long term, the bill would consolidate the AOTC and LLC into one simplified, permanent AOTC that will provide up to $2,500 per year in tax relief for students and their families, along with other changes that would make college more affordable for low- and middle-income students.

“We strongly support the goals of this bill to provide temporary pandemic relief to students and to simplify the current higher education tax credits which are overly complex and difficult for students and their families to correctly use,” the groups wrote.

COVID-19 Policy Developments

Learn more about the higher education association effort to urge Congress and the administration to craft a comprehensive response that addresses the challenges students and campuses are facing.

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