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Grant Payments for Education Assistance Policy

Under certain circumstances, support service payments made under a vocational education training grant are not taxable. Federal regulations differentiate between payments made under a federal job training grant (e.g., the Carl D. Perkins Vocational and Applied Technology Education Act) and payments made under a scholarship or fellowship grant. The reason is that participants of a federal job training grant are not degree-seeking candidates at a qualified higher educational institution. Rather, these individuals are receiving training to improve their level of education and to increase their employability.

The Internal Revenue Rule 75-246 provides for the payment of nontaxable training allowances to individuals who cannot reasonably afford to participate in a job training program. The IRS recommends that institutions offering a federal jobs training program conduct a financial needs assessment of the participants. This is to ensure that support service payments such as those paid for meals, travel, and dependent care expenses are made based on the financial need of the recipient. If a financial need is determined, then the support service payments are not 1099 reportable.

However, if support service payments are made and a need has not been established, then report amounts paid in excess of $600 for a calendar year on a Form 1099-G, Certain Government Payments.