June 10, 2019

Cortez Masto Cosponsors Bill Providing Tax Relief to College Scholarship Recipients

Washington, D.C. – U.S. Senator Catherine Cortez Masto (D-Nev.) today cosponsored legislation to ensure students receiving scholarships and grants to finance their higher education are not overly taxed. Introduced by Senators Tim Scott (R-S.C.) and Maggie Hassan (D-N.H.), the Tax Relief for Student Success Act would require college students’ scholarship aid to be taxed as individual income rather than as a trust or estate.

“Middle- and low-income students face overwhelming obstacles in accessing and financing higher education, and scholarships and grants are often the only resources available to help make college affordable. Taxing students on vital scholarships and grants is simply unfair and detracts from their ability to pay for everyday items and invest in their future. I’m proud to cosponsor legislation that provides tax credits to ease the costs of college and make higher education possible for all students in Nevada, and across the country.”

In addition to Senators Cortez Masto, Scott and Hassan, the bill is also cosponsored by U.S. Senators Ron Wyden (D-Ore.), Bill Cassidy (R-La.), Angus S. King, Jr. (I-Maine), Doug Jones (D-Ala.) and Kyrsten Sinema (D-Ariz.). The Tax Relief for Student Success Act is also supported by the American Council on Education and the National Association of Student Financial Aid Administrators.

BACKGROUND

The Tax Relief for Student Success Act would change the IRS code of 1986 so that scholarship aid for college students is taxed at the individual income tax rate rather than the trust/estate rate. In the past, scholarship or fellowships were tax-free for students, but the tax plan passed in 2017 changed that rule. Currently, students who receive scholarships to attend college can be subject to up to a 37 percent rate, as it is classified under the unearned income category.

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