Menendez Joins Colleagues in Introducing Fix to the Kiddie Tax for College Students

WASHINGTON, D.C. – U.S. Senator Bob Menendez, a senior member of the Senate Finance Committee that sets national health policy, today joined a bipartisan group of senators in introducing a fix to the Kiddie Tax to ensure college students’ scholarships and grant aid are being taxed at a fair rate. Taxes on student scholarships for non-tuition expenses were raised as a result of the 2017 Trump tax law.

“This is just another example of how hardworking families have been victimized by the Trump tax law. Homeowners, Gold Star families and now college students have all been hit hard by this disastrous tax scheme,” said Sen. Menendez. “There’s absolutely no reason college students should have to pay an exorbitant amount of taxes on their financial aid packages while multinational corporations and their CEOs receive massive windfalls. Students work hard to earn a higher education and their families often make great sacrifices to send their kids to school. This sloppy mistake in the tax bill must be fixed immediately and I’m working with my colleagues to push through legislation that ensures college students are not unfairly hit with a huge tax bill.”

There are 1.3 million undergraduate students and 15,000 graduate students who receive financial aid, including scholarships and grants, to help pay for non-tuition expenses such as room and board.

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.

Also cosponsoring the bill are Senators Maggie Hassan (D-N.H.), Tim Scott (R.S.C.), Ron Wyden (D-Ore.), Pat Roberts (R-Kan.), Bill Cassidy (R-La.), Catherine Cortez Masto (D-Nev.), Steve Daines (R-Mont.), Amy Klobuchar (D-Minn.), Susan Collins (R-Maine), Richard Blumenthal (D-Conn.), Joni Ernst (R-Iowa), Angus King (I-Maine), Kevin Cramer (R-N.D.), Doug Jones (D-Ala.), and Kyrsten Sinema (D-Ariz.). The bill is endorsed by the American Council on Education and the National Association of Student Financial Aid Administrators.