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CARES ACT and Tax Implications

Frequently Asked Questions about the Higher Education Emergency Relief Fund and Taxes.

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Important Notice

The following information is important for your 2020 federal taxes, if you received any federal CARES Act funds (Higher Education Emergency Grants):

Is the CARES Grant Considered Income?

Q: I am a student who received an emergency financial aid grant under the CARES Act (for unexpected expenses, unmet financial need, or expenses related to the disruption of campus operations on account of the COVID-19 pandemic). Is this grant included as part of my income?
A: No. Emergency financial aid grants under the CARES Act are qualified disaster relief payments under section 139 of the Internal Revenue Code. This grant does not get included in your income.

Qualfied Education Expenses

Q: I received an emergency financial aid grant under the CARES Act and used some of it to pay for course materials or technology because the campus moved to a remote environment. Can I claim a tuition and fees deduction for the cost of these materials, or treat the cost of these materials as a qualifying education expense for purposes of claiming the American Opportunity Credit or the Lifetime Learning Credit?
A: No. Because the emergency financial aid grant is not included in your income, you cannot claim any deduction or credit for expenses paid with the grant including the tuition and fees deduction, the American Opportunity Credit, or the Lifetime Learning Credit. See section 139(h) of the Internal Revenue Code.

1098-T

Q: Do higher education institutions have any reporting requirements of CARES Act funds for the 1098-T?
A: No. The emergency financial aid grants are qualified disaster relief payments. Students do not include them as income for their tax return, nor can they claim deductions or credits for these amounts. The IRS will not require that these grants be reported on Form 1098-T.

Questions?

If you have any additional questions, please contact a tax expert.