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Integration of Pell Grants and Tax Credits

By March 4, 2015 No Comments

College education is becoming increasingly more expensive; and, a college degree is valued in the workforce. The Pell Grant and other scholarships are used by millions of students to help ease the cost of attendance. The interaction between these scholarships and the American Opportunity Tax Credit (AOTC), can be complex, and can lead to leaving eligible tax credit money unclaimed.

Pell Grant Allocation
A Pell Gant (or many other scholarships) may be applied to:
1. Tuition, fees, and course related materials, or
2. Living expenses.

When the Pell Grant is applied towards living expenses, the scholarship is taxable. However, in many situations, students would benefit by including their Pell Grant (or other scholarships) in taxable income (or towards living expenses) so that they have more expenses eligible for the American Opportunity Tax Credit.

Many students and parents are unaware that they have a choice in how this grant (or other scholarships) is allocated.

For more information and examples in regards to this topic, please visit the referenced article. For help calculating and maximizing your benefits, please contact Brian McFarren at of (231) 726-5815.