WASHINGTON —Today, U.S. Senators Maggie Hassan (D-NH), Tim Scott (R-SC), and fourteen of their colleagues introduced a bipartisan fix to the Kiddie Tax to ensure that 1.3 million undergraduate and 15,000 graduate students’ scholarships and grant aid are being taxed at a lower rate. Due to a provision in the 2017 tax law, taxes on student scholarships for non-tuition expenses were raised.
“Students already feel the heavy burden of the cost of higher education, and because of an oversight in the Republican tax law, students have been hurt even more by a spike in taxes on scholarships that cover non-tuition expenses like their room and board,” Senator Hassan said. “By bringing down taxes on those scholarships, this bipartisan legislation reverses the mistake in the tax law and provides some much needed relief to students in New Hampshire and across the country. I thank Senator Scott for working with me on this important issue.”
“Education is the single most important thing we can leave to the next generation. I am thankful that we have a bicameral, bipartisan coalition seeking to ensure that undergraduate and graduate students are able to save more of their own money to invest into their future,” said Senator Scott. “The Tax Reform Act of 2017 was a huge win for this country, but with all such complicated legislation a technical fix is required. I do thank Senator Hassan for being willing to work on this piece.”
In addition to Senators Scott and Hassan, this bill is cosponsored by Senators Ron Wyden (D-OR), Pat Roberts (R-KS), Bob Menendez (D-NJ), Bill Cassidy (R-LA), Catherine Cortez Masto (D-NV), Steve Daines (R-MT), Amy Klobuchar (D-MN), Susan Collins (R-ME), Richard Blumenthal (D-CT), Joni Ernst (R-IA), Angus King (I-ME), Kevin Cramer (R-ND), Doug Jones (D-AL), and Kyrsten Sinema (D-AZ). The bill is endorsed by the American Council on Education and the National Association of Student Financial Aid Administrators.
The bill would limit the tax liability of students by treating the portion of scholarship aid devoted to non-tuition expenses as a form of earned income, which will be taxed at the student’s individual income tax rate, rather than the trust/estate rate or even their parent’s rate.