Tax-Free Pell Grant Act
Senate Committee Reviews Bill to Make Pell Grants Tax-Free Starting in 2026
Stalled
No legislative action in over 90 days.
Legislative Progress
Key Points
- Pell Grants would no longer count as taxable income for students, even if the money is used beyond tuition and required school costs.
- This could lower a student’s tax bill (or keep them from owing taxes) when they get a Pell Grant.
- The bill also says students can still use education tax credits even if they received a Pell Grant, without reducing those credits just because of the Pell Grant.
- The change would start for tax years beginning after December 31, 2025, meaning it would affect taxes filed for the 2026 year and after.
Impact Analysis
Personal Impact
How this policy affects specific groups of people
Milestones
Read twice and referred to the Committee on Finance.
Sent to a congressional committee for expert review. The committee decides whether this bill moves forward.
Introduced in Senate
The bill was officially filed and given a number. It now enters the legislative queue.
Votes
No votes have been recorded for this legislation yet.
Related News
3 articles
Bipartisan Proposal Would Make Pell Grants Tax-Exempt
A bipartisan coalition introduced the Tax-Free Pell Grant Act to make leftover Pell Grant funds used for living expenses tax-exempt. The bill would also allow recipients to make full use of the American Opportunity Tax Credit (AOTC) without deductions for Pell funds.
Washington Watch: Tax-Free Pell Grant reintroduced in Senate
A bipartisan group of senators reintroduced the Tax-Free Pell Grant Act, a top priority for community colleges. The measure would shield students from paying taxes on Pell Grant portions used for books and living expenses and enable them to qualify for the $2,500 AOTC.
Washington Watch: What's in the 'One Big Beautiful Bill Act'
The House-passed reconciliation bill did not include the bipartisan Tax-Free Pell Grant Act. Advocates are now pushing for its inclusion in the Senate version to fix the tax treatment of Pell Grants and improve AOTC eligibility for low-income students.
Source Information
Document Type
Congressional Bill
Official Title
Tax-Free Pell Grant Act
Data Sources
Sponsor
Cosponsors
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