Pell Grant funds can be used to cover tuition and fees for school, though you cannot use the funds to finance your education at more than one school at a time. Outside of tuition and fees, however, you can use the funds for books, technology expenses, transportation and supplies.Money received through a Pell Grant is tax-free, provided you use the funds for eligible educational expenses. However, the Internal Revenue Service (IRS) states that you must keep track of Pell Grant money spent on incidental purchases (room and board, optional equipment, etc.) and include them in your gross income for tax purposes.