Stipend budgeting/taxes

[flocell94]

Hello all,

I have recently been accepted into a PhD program at Vanderbilt University, and I am attempting to find a apartment/house for rent and set a budget. However, I am unsure of the rate at which I will be taxed as a graduate student so I have no idea of how to begin doing this. My stipend is $26,000 per year (or $2167 per month), but I am unsure of the interval at which it will be disbursed. My question is this: how much should I expect to be taxed as a grad student? Thanks for any advice you all can offer!

Edited April 14, 2018 by flocell94

[rosekster]

Unless you’re on a special fellowship (NDSEG, NSF GRFP), the university should withhold the necessary taxes, whether that be federal, state, or city. You’ll need to look up specifically what state and city taxes are, but federal for 2018 will be 12%

[jmillar]

11 minutes ago, rosekster said:

Unless you’re on a special fellowship (NDSEG, NSF GRFP), the university should withhold the necessary taxes, whether that be federal, state, or city. You’ll need to look up specifically what state and city taxes are, but federal for 2018 will be 12%

You can still be on an internal university fellowship and not have taxes withheld (happens where I go).

2 hours ago, flocell94 said:

Hello all,

My question is this: how much should I expect to be taxed as a grad student?

This will depend on a number of things: What type of funding (fellowship, RA, TA), what allowances you claim on your W4, and the state taxes in your area (if you keep your residence in a previous state or switch to Tennessee). If you have specific fellowships, taxes won't be withheld for you, but often in those cases you won't have to pay FICA tax, which is close to 8%. Assuming you have no special circumstances, filing single, making less that $38,000 a year, your tax rate will be 12% (more complicated than this: if you go for simple standard deduction, everything after $12,000 is taxed, with the first extra $9,500 taxed at 10%). If you switch your residence to Tennessee, they don't have income taxes, so you wouldn't have to worry about that part.

[flocell94]

14 hours ago, jmillar said:

You can still be on an internal university fellowship and not have taxes withheld (happens where I go).

This will depend on a number of things: What type of funding (fellowship, RA, TA), what allowances you claim on your W4, and the state taxes in your area (if you keep your residence in a previous state or switch to Tennessee). If you have specific fellowships, taxes won't be withheld for you, but often in those cases you won't have to pay FICA tax, which is close to 8%. Assuming you have no special circumstances, filing single, making less that $38,000 a year, your tax rate will be 12% (more complicated than this: if you go for simple standard deduction, everything after $12,000 is taxed, with the first extra $9,500 taxed at 10%). If you switch your residence to Tennessee, they don't have income taxes, so you wouldn't have to worry about that part.

Thank you for your help! I think I have a good idea of what to expect now. I'm going to work on switching my residence pronto. 

[Emily Roberts]

I applaud you for sketching a budget prior to committing to housing!

It's simple to calculate your tax liability using the info you provided, at least for your first full year of employment (2019). 2018 may be different as you'll be starting/changing jobs mid-year.

For federal income tax, if you are single and take the standard deduction of $12,000, you will pay 0% tax on that first $12,000 of income, 10% tax on the next $9,525, and 12% on the remainder (these are the 2018 brackets). Using the numbers you provided, that is 10%*$9525+12%*($14,000-$9,525)=$1,489.50 or $124.13/mo.

This tax liability may shift if you have other adjustments to your income, such as additional income sources or above-the-line deductions, e.g., interest paid on student loans. You should check if you're receiving any scholarship funding or similar that isn't tax-free (i.e., money that goes toward fees that are not qualified education expenses) or if any of your stipend will go toward paying qualified education expenses. For estimation purposes, you could just add any net scholarship income to your stipend or subtract any net qualified education expenses from your stipend, even if that's not exactly how you'll treat it on your tax return. Check your offer letter for these kinds of details on your non-stipend funding.

You won't pay FICA tax no matter your funding source.

Tennessee doesn't have state income tax on ordinary income, just investments.

If you have an assistantship, you'll fill out a W-4 and have income tax automatically withheld from your paycheck. If you have a fellowship (internal or external), it's most typical for universities to not withhold any income tax (though a few do). In that case, you would need to look into filing quarterly estimated tax - probably not necessary for 2018, but likely required in 2019 and following. 

[flocell94]

17 minutes ago, Emily Roberts said:

I applaud you for sketching a budget prior to committing to housing!

It's simple to calculate your tax liability using the info you provided, at least for your first full year of employment (2019). 2018 may be different as you'll be starting/changing jobs mid-year.

For federal income tax, if you are single and take the standard deduction of $12,000, you will pay 0% tax on that first $12,000 of income, 10% tax on the next $9,525, and 12% on the remainder (these are the 2018 brackets). Using the numbers you provided, that is 10%*$9525+12%*($14,000-$9,525)=$1,489.50 or $124.13/mo.

This tax liability may shift if you have other adjustments to your income, such as additional income sources or above-the-line deductions, e.g., interest paid on student loans. You should check if you're receiving any scholarship funding or similar that isn't tax-free (i.e., money that goes toward fees that are not qualified education expenses) or if any of your stipend will go toward paying qualified education expenses. For estimation purposes, you could just add any net scholarship income to your stipend or subtract any net qualified education expenses from your stipend, even if that's not exactly how you'll treat it on your tax return. Check your offer letter for these kinds of details on your non-stipend funding.

You won't pay FICA tax no matter your funding source.

Tennessee doesn't have state income tax on ordinary income, just investments.

If you have an assistantship, you'll fill out a W-4 and have income tax automatically withheld from your paycheck. If you have a fellowship (internal or external), it's most typical for universities to not withhold any income tax (though a few do). In that case, you would need to look into filing quarterly estimated tax - probably not necessary for 2018, but likely required in 2019 and following. 

Thank you for this. This really helps me!