If you received a Pell grant, you won’t include the grant amount in your
federal taxable income unless you used the funds for unapproved
purposes.
Generally, for the Pell grant to retain its tax-free status, you must
be a degree candidate at the college and only use the funds to pay for
tuition, fees, books, supplies and equipment. However, if you use the
funds to pay your room and board or even school-related travel expenses,
then you must include the portion of the grant you use to pay these
expenses in taxable income.
To report a Pell Grant (or portion thereof) that is taxable:
- Go to Federal Taxes> Wages and Income
- Scroll to the Less Common Income section and choose Miscellaneous Income (the last choice)
- Choose Other income not already reported on a Form W-2 or Form 1099
- Answer Yes on the Other Wages Received screen
- Continue past Wages Earned as a Household Employee and Sick or Disability Pay
- Answer Yes on the Any Other Earned Income screen
- Choose Other on the Enter Source of Other Earned Income screen
- Enter your grant information on the Any Other Earned Income screen.
This will report your scholarships on line 7 of your Form 1040, and you will not be subject to Self Employment Tax.
