Tuition and other educational benefits provided by Indian tribes to tribal members under the Tribal General Welfare Exclusion Act of 2014 (the Act) are not taxable and are not subject to information reporting requirements if such benefits meet the requirements of the Act. Tribal students who receive these nontaxable educational benefits paid by the tribe should not include them on their federal income tax return even if they’re shown on a Form 1098-T, Tuition Statement, from the educational institution.
Educational benefits provided by Indian tribes that meet the requirements of the Act are not subject to the information reporting requirements of IRC Section 6041. Therefore, tribes and tribal governments should not report these amounts on information returns such as Forms W-2 or 1099.
Educational benefits may include tuition payments and allowances for room and board for the student (spouse and dependents) to attend:
- An accredited college or university,
- Educational seminars,
- Vocational and technical education,
- Adult education,
- Continuing education, or
- Alternative education.
Educational benefits also include transportation to and from school, tutors and supplies used for their studies. These supplies may include, but are not limited to, things such as clothing, backpacks, computers, musical instruments, sports equipment, etc.
Tribal students who receive a Form 1098-T that includes only educational benefits paid by the tribe should not include them on their federal income tax return. Tribal students who receive a Form 1098-T that includes both tribal and non-tribal payments should subtract the tribal payments from the total and only report the non-tribal payments on their federal income tax return.
For example, a tribal student attended a qualifying accredited educational institution and received a tribal scholarship of $3,000 for tuition (nontaxable) and a $5,000 grant administered by the Department of Education that requires them to use the funds to teach (taxable). For the calendar year, the student received a Form 1098-T from the institution for $8,000. The tribal student should subtract the $3,000 tribal funds from the $8,000 amount and enter the $5,000 difference in gross income when completing their income tax return. The $3,000 tribal scholarship as general welfare is nontaxable and is not included on the student’s return.
If you receive a letter from the tribe outlining the educational payments you received, save it with your tax records. Do not send a copy of that letter to the Internal Revenue Service.
Amounts you receive for a non-tribal scholarship or grant may still be eligible for educational credits under certain conditions. See Publication 970, Tax Benefits for Education, and Education Credits--AOTC and LLC for more information on non-tribal scholarships and grants. Note that nontaxable funds (tribal scholarships) used to pay educational expenses cannot be used to compute any allowable education credit.
If you still have questions, please call the IRS Tax Exempt and Government Entities Customer Account Services at 877-829-5500.
You can also contact the IRS Indian Tribal Governments specialist assigned to your tribe for any questions or needs regarding Federal Tax or the Bank Secrecy Act. Find Your ITG Specialist includes the name, telephone number, and duty hours for the ITG specialist assigned to each tribe.