Congress enacted the American Rescue Plan Act of 2021 in March, and it has helped many college students and those with student loans. This bill allocated $40 billion to be given to colleges and universities, and it has also created new tax breaks for student loans that have been forgiven. The funds from this bill have impacted college students and those with student loans in a positive way.
As someone in the tax preparation business, it is necessary to understand how the American Rescue Plan can affect the income of regular taxpayers, especially those with student loans. In addition, the American Rescue Plan Act creates new tax breaks for student loan borrowers. Student loans forgiven under specific programs are now exempt from income taxes. Borrowers are not liable to pay taxes on the forgiven portion of their loans.
The American Rescue Plan Act is a positive development for college students and those with student loans. The funding and tax breaks provided in the bill will help many people pay for their education and reduce their overall debt burden.
What Is HEERF American Rescue Plan and How It Impacts Students
The Higher Education Emergency Relief Fund (HEERF) was created under the CARES Act to fund colleges and universities. A large portion of this funding must be given directly to students through grants. Schools that have already received HEERF funding from the CARES Act must use at least as much funding for emergency student grants as they did the year before.
Schools receiving HEERF funding for the first time must use at least 50 percent of the funding for grants. If the school is a for-profit institution, it must use 100% of the funding for grants. When awarding grants, schools must prioritize students with exceptional financial needs.
The CARES Act provides grants to students to help with expenses related to the coronavirus. These expenses include school-related costs, food, housing, and child care. The gifts do not need to be repaid and are tax-free. Knowing these basic facts will be helpful in tax preparation.
How Can the HEERF Funds Be spent?
The Higher Education Emergency Relief Fund (HEERF) was created in response to the COVID-19 pandemic. The fund provides financial assistance to colleges and universities to continue operating and serving their students during this crisis.
HEERF funds can cover various expenses related to the pandemic, including payroll, staff training, technology, and other necessary costs. This financial assistance is vital for helping schools keep their doors open and continue providing quality education to their students.
With the HEERF funds, colleges and universities can operate as often as possible during this difficult time. It is a critical investment in our future and will help ensure that students can continue getting the training to succeed in the workforce.
Conclusion
The American Rescue Plan will have a significant impact on college taxes. For one, the Plan will make college tuition and fees tax-deductible. It will help make college more affordable for many Americans.
Additionally, the Plan will create a new tax credit for eligible students and their families. This credit will cover up to $4,000 of tuition and fees per year. Finally, the Plan will make it easier for people to refinance their student loans.
As someone in the tax preparation business, being aware of these provisions can help you deal with clients with student debt better.
If you need tools for your tax preparation business, you should contact Keystone Tax Solutions. We provide top-notch tax preparation solutions. Please schedule an appointment now so that we can talk about your firm.
