“To amend the Internal Revenue Code of 1986 to expand the exclusion of Pell Grants from gross income, and for other purposes.”
No CRS summary available for this bill.
This section expands the exclusion from gross income under IRC §117(b)(1) to include all Federal Pell Grants awarded under the Higher Education Act of 1965 (previously, only scholarship and fellowship grants to the extent used for qualified tuition and related expenses). It further revises the coordination rule under IRC §25A(g)(2)(A) to exclude Federal Pell Grants from reducing American Opportunity and Lifetime Learning Credits (previously, reduced by any qualified scholarship). The changes apply to taxable years beginning after December 31, 2024.
This section expands the definition of qualified tuition and related expenses for the American Opportunity Tax Credit and Lifetime Learning Credit (i.e., nonrefundable tax credits for eligible postsecondary education costs) to include, in addition to tuition and fees, course materials, computer or peripheral equipment, and child and dependent care expenses incurred to enable the taxpayer's enrollment at an eligible educational institution. It strikes prior subparagraph (D); adds definitions and limitations for the new categories—including child and dependent care expenses for household services or care of qualifying individuals (per rules similar to IRC §21, excluding overnight camps) that must support an eligible student's enrollment, and computer or peripheral equipment (i.e., computers, peripherals, software, or internet access primarily used by the student during enrollment; aggregate $1,000 annual limit)—and makes conforming changes to coordination rules with deductions. The amendments apply to taxable years beginning after December 31, 2024.