Taxing my stipend?

[ehpurefoy]

It goes without saying that my budget is going to be tight when I start school in the fall. I have a very small monthly stipend and need to make every cent count...so will the check (is it even a check?) I receive be the full monthly amount? Will it have federal and state taxes taken out?

Excuse my ignorance!

[lyonessrampant]

From what I know, yes, it will be taxed like a regular job income. You'll fill out paperwork about number of dependents, etc. However, it's likely that you'll get most if not all of that taxed amount (if you're a US citizen at a US school) back come tax season.

[newms]

As I understand it, yes our stipends will be taxed. Here's a couple recent threads on this discussion: and a very good one here:

[mandarin.orange]

It goes without saying that my budget is going to be tight when I start school in the fall. I have a very small monthly stipend and need to make every cent count...so will the check (is it even a check?) I receive be the full monthly amount? Will it have federal and state taxes taken out?

Excuse my ignorance!

Is it a fellowship, or stipend for being an RA or TA?

For my MS program, I had an award/fellowship the first year and it was not taxed. I got the full amount. Year 2 I was a TA like the majority in the department and about 12% of my checks went to Federal, State AND City taxes. After that I was paid hourly for working in my advisor's lab, definitely taxed just like any other wages, AND contributions to a university-sponsored retirement account that were mandatory!

Check around online for how this is handled for the state where you plan to reside and attend school. I am already drafting a budget for my PhD program next year where I plan to only see about 75-80% take-home pay. Also check with the dept to find out if your stipend is for 12 or 9 months. Both of my programs paid the awarded stipend out over 9 months, and there was additional funding for the summer (though the per-month amount during the summer was much less).

Find out if health benefits are included, or if this will be an additional cost in your budget.

Begin researching both university-wide and external fellowships (e.g. NSF) you can apply for during year 1 or 2.

[dudedolittle]

If your funding situation is for 9 months, and the project your are working on goes for a bit mid summer are you required to work it? It isn't delineated in the offer. I guess a better way to say it is: if you are given a 9 month/32 week offer, and you are offered a smaller amount to work in the summer on the same project do you have to? Can they revoke your funding for the fall if you don't?

[Eigen]

Even if your fellowship doesn't have taxes taken out of the paycheck directly, you still have to pay taxes on it... You report it as "unearned income", as opposed to "earned income". There's a whole IRS publication on scholarships/fellowships, if you want to know more.

[Slorg]

Stipends and fellowships are almost always taxable. (Even if taxes aren't withdrawn from your paycheck!)

Fortunately, if your stipend is small, then so is your tax bill.

Edited April 29, 2011 by Slorg

[Eigen]

You can use some tax calculators (TurboTax has a decent one online) to estimate how much you'll pay at the end of next year so you can budget for it.

Edited April 29, 2011 by Eigen

[mandarin.orange]

If you are given a 9 month/32 week offer, and you are offered a smaller amount to work in the summer on the same project do you have to? Can they revoke your funding for the fall if you don't?

It is generally expected. Ask your dept. what grad students tend to do for summer activities/funding.

[Bookman84]

So, check this tidbit out: I was poking around Tufts' website for tax information when it comes to stipends. I have to complete a W-9, but it says Tufts does not deduct taxes from payments and does not issue a 1099! I just found that odd. I guess I just need to budget harder. I can't imagine the tax bill will be huge when you take the standard deduction, deduct the Life Long Learning credit, any interest paid on my undergrad loans?

Also, am I wrong in getting the impression after following these threads over the last year that some universities interpret the tax code differently? Is it a grey area for some schools?

Edited April 29, 2011 by Bookman84

[Eigen]

They wouldn't give you a 1099... A 1099 is for interest earned. Do you perhaps mean a 1098? That's for education expenses.

Many schools opt out of directly deducting taxes from stipend payments, opting instead to let the student file the taxes themselves. The benefit of this method is that you don't have to pay SS/Medicare... In almost every case, however, you are legally required to pay taxes on the stipend.

You just have to report it yourself instead of your employer reporting it... It goes under "unearned income", with the notation "SCH" for scholarship next to it. Refer to the IRS publication on Scholarships and Fellowships for more information on how, exactly, to report it. For instance, my school only reports income from assistantships... All fellowship stipends are left up to the student to report.

Sadly, most of the tax breaks for education are for undergraduate education... This year I wasn't eligible for any educational tax breaks. Tuition and Fees can be directly deducted from your stipend as "untaxable income", since it's paying for education... But books, etc. do not count as "valid" educational expenses according to the IRS.

Also note that technically a tuition waiver counts as income... But then you pay tuition out of it, so it's "untaxable" income, but still must be reported.

Married, living off of one fellowship (my income), I payed about $600 in Federal and $400 in state taxes this year. My wife started grad school this spring, I expect to pay around $4000 in federal taxes next year. All of my single friends are paying around $3000-$4000 on their stipends, to give you a rough feel.

If your school does not take taxes out of your stipend checks, and you will owe over $1000 by the end of the year, you will need to pay quarterly taxes or you will have to pay a penalty at the end of the year. Basically, in the eyes of the IRS you count as self-employed. This is why I urge everyone to use one of the tax calculators out there and see what you'll owe... You really want to avoid paying the penalty by doing quarterly taxes if you can.

Edited April 29, 2011 by Eigen

[Myshkin2011]

Pay taxes. Not doing so can come back and bite you later. Even if the IRS doesn't come after you, there are lots of situations where you'll need to prove you paid taxes.