Are CARES Act Stimulus Checks Considered Taxable or Untaxed Income For Title IV Purposes, Including PJ?

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For taxable income, no. The following is from the IRS Economic Impact Payment Information Center:

"Q31. Is the Payment includible in my gross income? (updated April 24, 2020)

A31. No, the Payment is not includible in your gross income.  Therefore, you will not include the Payment in your taxable income on your Federal income tax return or pay income tax on your Payment. It will not reduce your refund or increase the amount you owe when you file your 2020 Federal income tax return. A Payment also will not affect your income for purposes of determining eligibility for federal government assistance or benefit programs."

If the IRS does not consider stimulus checks (stimulus payments) to be taxable income, it is not taxable income on the FAFSA or in the calculation of the student's expected family contribution (EFC). And, while professional judgment (PJ) discretion is solely that of the financial aid administrator and the school, NASFAA does not believe it would be appropriate to include stimulus payments in the calculation of taxable income when exercising PJ for a student or parent for any award year or 12-month period. This is because stimulus payments are earmarked to assist students and parents with expenses and financial needs directly related to the COVID-19 pandemic. It is also consistent with the U.S. Department of Education's (ED's) treatment of stimulus payments for the 2009-10 award year during the "Great Recession" when they were excluded entirely from need analysis.

For untaxed income, we are unsure. NASFAA has asked the U.S. Department of Education (ED) if stimulus payments are included as untaxed income on the FAFSA or in the EFC calculation. As soon as we have a definitive answer to this question, we will update this AskRegs Knowledgebase Q&A and post it in Today's News. In the meantime and for the same reasons stated above, NASFAA does not believe it would be appropriate to include these payments in the calculation of untaxed income when exercising PJ for a student or parent for any award year or 12-month period.

Note: CARES Act stimulus payments technically are refundable tax credits, which are also known as Economic Impact Payments and recovery rebates. These funds will appear on 2020 tax returns accordingly. The above guidance only applies to stimulus payments and not to Higher Education Emergency Relief Fund (HEERF) grants to students or institutions under the CARES Act.

AskRegs Q&As represent NASFAA's understanding of regulatory and compliance issues. They are FOR INTERNAL USE ONLY. While NASFAA believes AskRegs Q&As are accurate and factual, they have not been reviewed or approved by the U.S. Department of Education (ED). If you should need written confirmation of AskRegs information for audit or program review purposes, please contact your ED School Participation Division. NASFAA shall not be liable for technical or editorial errors or omissions contained herein; nor for incidental or consequential damages resulting from the furnishing, performance, or use of this material.