The IRS has answered questions on how students and higher education institutions should report pandemic-related emergency financial aid grants.

Emergency financial aid grants made by a federal agency, state, Indian tribe, higher education institution or scholarship-granting organization to a student because of an event related to the COVID-19 pandemic are not included in the student’s gross income. 

Also, students should not reduce an amount of qualified tuition and related expenses by the amount of an emergency financial aid grant. If students used any portion of the grants to pay for qualified tuition and related expenses on or before Dec. 31, 2020, they may be eligible to claim a tuition and fees deduction or the American Opportunity Credit or Lifetime Learning Credit on their 2020 tax return. The tuition and fees deduction is not available for tax years beginning after Dec. 31, 2020.

Get all the information here.