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Is Step Up money taxable? What the IRS and Florida law say.

As year-end tax planning approaches, Florida PEP and ESA families often wonder whether scholarship reimbursements must be reported as gross income or trigger a 1099. Here is what Florida statutes, Step Up policy, and IRS guidelines say about educational assistance.

  • ProgramFlorida PEP, through Step Up for Students
  • Checked

For Florida PEP families whose scholarship is managed by Step Up for Students. Independent informational guide, not official tax advice; consult a qualified certified public accountant (CPA) or tax attorney for personal filing decisions.

A parent reviewing homeschool receipts and tax planning records at a wooden desk with a calculator and laptop
Step Up for Students scholarship disbursements are state-authorized educational grants, not earned wages or taxable compensation.

Quick answers.

Does Step Up for Students issue a 1099 tax form to parents?
No. Step Up for Students does not issue Form 1099 to parents for scholarship disbursements. Reimbursements are repayments for approved educational expenses, not taxable payments for services rendered.
Are Florida PEP scholarship reimbursements considered taxable income?
Under Section 1002.395 of the Florida Statutes and IRS rules governing qualified scholarships, state educational grant funds spent on qualified learning materials and tuition are generally not treated as gross taxable income.
Can I deduct PEP educational expenses on my federal tax return?
Generally, taxpayers cannot double-dip by claiming educational tax deductions or credits for expenses that were already fully reimbursed by scholarship funds. Consult a tax professional for guidance on your specific household situation.
What financial records should families keep for tax purposes?
Families should archive copies of all submitted itemized receipts, proof of payment documents, and EMA reimbursement confirmation statements on their personal devices for their records.

The short answer: grants, not income.

Every year between October and January, parent discussion boards fill with the same urgent inquiry: Will Step Up for Students send me a 1099, and is my student’s scholarship money considered taxable income?

The direct answer under state and federal frameworks is no, scholarship disbursements are not wages or compensation:

  • No 1099 issued: Step Up for Students is a state-approved nonprofit scholarship funding organization. It does not send Form 1099-MISC, 1099-NEC, or 1099-K to parents because scholarship payments are reimbursements for approved educational purchases, not taxable compensation for services.
  • Educational grant classification: Under Section 1002.395 of the Florida Statutes, funding “comes from tax credit funds raised from corporate donors by Step Up For Students” to provide state-authorized educational choices.
  • To understand how the program is structured and funded by corporate tax credits, see our guide on how PEP is funded and income rules.

The IRS framework: qualified education expenses.

Under federal tax principles (Internal Revenue Code Section 117), scholarship and grant funds used by degree-seeking or primary/secondary students are generally non-taxable if they meet two primary criteria:

  1. Used for qualified expenses: Funds are used exclusively for qualifying tuition, course-related fees, books, supplies, and required educational equipment. For a full breakdown of allowable learning supplies, review what PEP covers.
  2. Not compensation for employment: The parent or student is not providing labor or services to the funding organization in exchange for the scholarship.

Because Florida PEP reimbursements are strictly tied to vetted educational receipts submitted through EMA, the funds represent reimbursement of qualified educational expenses rather than taxable personal gain.

The "double-dipping" rule: tax deductions and credits.

While scholarship reimbursements are generally not counted as gross taxable income, receiving scholarship funds does affect how you treat those expenses on federal tax returns:

  • No dual tax benefit: You cannot deduct an expense on your federal tax return (such as an educator expense or medical deduction) if that expense was already paid for or reimbursed with tax-free scholarship funds.
  • Savings accounts (529 & Coverdell): You cannot use a 529 College Savings Plan or Coverdell ESA distribution to pay for the exact same expense that Step Up reimbursed.
  • For complete reimbursement submission rules, read our master Step Up reimbursement guide.

What records parents should archive.

Even though Step Up does not issue a 1099, keeping organized financial records is essential for any family managing educational accounts:

  • Retain original receipts: Save digital or physical copies of every invoice showing the itemized description, date, and payment method.
  • Maintain proof of payment: Keep credit card statements or cleared bank records verifying transactions; see our reference on proof of payment requirements.
  • Export annual EMA statements: Download the annual summary of approved claims from your student’s EMA portal at the end of each school year for your personal files.

Archive every receipt and reimbursement statement cleanly.
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Sources.

All read on October 28, 2026. We re-check them when new editions are published.

  • Section 1002.395, Florida Statutes (2026)

    Florida Senate web page: statutory definition of the Florida Tax Credit Scholarship Program, non-profit scholarship funding organization structure, and educational grant provisions.

    flsenate.gov
  • PEP Family Handbook (2026–27)

    Step Up for Students web page, read October 28, 2026: funding sources from corporate tax credits, nonprofit organization status, and eligible education expenses.

    stepupforstudents.org
  • Step Up for Students FAQs

    Step Up for Students web page, read October 28, 2026: scholarship disbursement procedures and account administration.

    stepupforstudents.org