Sign the petition to make graduate stipends tax-exempt again!

[juilletmercredi]

Hi all!

Graduate and post-doctoral stipends were tax-exempt until 1986, when federal law changed to make them subject to federal income tax. There is a petition on WhiteHouse.gov right now to get the Obama administration to consider changing them back to tax-exempt status.

The first petition on this issue fell just 2,500 signatures short by the deadline, and so it wasn't considered. This one needs 25,000 signatures by April 16. It only has 343.

http://wh.gov/RlM

I don't know about you, but the taxes on my graduate fellowship are about 20%. That brings it from decent to...not so decent. We're already working on low wages; spread the word to other grad student and postdoc friends who might be interested.

[Eigen]

Why should this be different than any other job and wages?

If the taxes on your graduate fellowship work out to about 20%, than that is an equivalent tax burden to someone who is not a graduate student working any other job with similar income. Why should this be special? After all, we already get to deduct huge parts of our funding package (tuition remissions) that are basically part of a graduate students' benefits package.

While it would personally benefit me to be able to not pay taxes, it just doesn't seem fair to all of the low-wage non graduate students out there.

[123student]

Eigen, We pay a substantial amount of fees and other miscellaneous expenses which non graduate students don't pay, such as books and conference fees. Our work is also double that of the regular work world: we study, research, write, conference, network, as well as perform our job duties. Add to this burdensome employment the fact that in many situations we "pay to work" when you consider the non-optional fees paid from our meager stipends.

If the taxes on your graduate fellowship work out to about 20%, than that is an equivalent tax burden to someone who is not a graduate student working any other job with similar income.

When was the last time you looked at your tax rate? Rates above 15% are for single filers making about $35k/year. Is your stipend that large? If so, heres what you have to look forward to next year: http://www.forbes.com/sites/moneybuilder/2011/09/30/2012-federal-income-tax-brackets-irs-tax-rates/

Factoring in all expenses, our net income is much lower than that of those who aren't in grad school, and with no special benefits. We do the work because it thrills us, not because we're more special than non grad students. But add a demanding job to our demanding studies, and I think most will agree that we deserve a break.

[Eigen]

I have no idea what Julietmercedi is making, but there's also no reason that her tax rate would be any higher for the same income than someone not working a job. If you read the comment of mine that you so nicely quoted, you see that it's an if/then statement, not a reference to myself at all. If taxes on the graduate stipend work out to about 20%, than that is an equivalent burden to someone who is not a graduate student. You also seem to have forgotten entirely about state taxes in your figuring. Federal tax rate is probably 15% for the vast majority of graduate students, yes. But then there's an additional state tax, in my case it's somewhere around 5-8% of my income on top of the federal tax.

But my point wasn't to argue what the actual rate of taxation is, but rather to point out that graduate students pay the same amount of money in taxes for the same amount of income as anyone else.

As to our work being "double" that of the real world... Actually, it's not that much different than any other full time researcher. They study, research, write, network, and attend conferences as well. And above all, the things that we have to pay for are usually benefits. Required benefits, maybe, but benefits nonetheless. We buy books that we get to keep. We pay for travel to conferences that benefit us. Just as with any college student, anything *required* for school can be deducted from taxes. This includes all mandatory university fees- so we're already not having to pay taxes on money that goes toward our education.

In a great many professional fields, continuing education + cash is required for yearly certifications (engineers, health care professionals). And let me tell you, the short courses they have to attend usually have costs on par with what I pay for conferences + fees in a year. Should they be given a break as well? And honestly, if you wanted to take the time to set it up as such, you could most likely file (Schedule C?) and write off conference travel as a job expense. I know many faculty and post-docs do exactly that.

I'm of the opinion that you are exactly right- we do the work because it thrills us- and we already have the luxury of being paid quite decently to get an education. I don't see why graduate students should be any more deserving of a tax exemption than any other group.

And you point out that we have "no special benefits"... Personally, I'd see access to university libraries and a free graduate degree as pretty large benefits, myself. Factor in your tuition exemption when you compare what you make to those of "equal educational background", and you'll see that most graduate stipends are quite competitive, when combining direct pay and "benefits".

I'll also point out that, imo, your argument is more suited to "why graduate stipends should be higher" than to "why graduate students shouldn't have to pay taxes". Taxes pay for all of the things we, as a society, use that the government provides. We should have to pay our part of that just like any other adult members of society.

Edited March 19, 2012 by Eigen

[Eigen]

I'm glad we could have a well reasoned discussion of the issue.

[ANDS!]

LMAO!

EGS your post smacks of "academic entitlement". Sorry but graduate students are not going to be making any "top overworked profession" lists any time soon and as such aren't likely to be getting any tax sympathies. Yes, yes I'm sure the hours you spend pouring over ancient texts is grueling and seemingly Sisyphean in nature, but the great majority of the population isn't going to have much sympathy for you.

Would it be nice for the amount on your stipend to be what you're actually getting - heck yes. But it's income. And income is taxable. As it should be (if you're into civic responsibility and all that).

Edited March 20, 2012 by ANDS!

[Sigaba]

Eigen, I won't be reading your posts any longer. Good luck.

@ECGscholar--

If you take the attitude in this post with you to graduate school, you are going to get eaten alive. If you're lucky, it will be a fellow graduate student--with our without a tax break--who does the chewing, rather than a professor.

[starmaker]

Why should I sign such a petition?

I want dignity and good working conditions for graduate students. Part of what that means is that I want them to be recognized legitimately as workers. Grad stipends should be taxed. And graduate assistants should be able to unionize (which might help with the whole higher stipends thing in some cases). And file complaints with the National Labor Relations Board. And be provided health insurance (I don't much like the employer-provides-health-insurance system, but as long as we have it, graduate assistants should benefit from it). And be eligible (if they otherwise meet the conditions) for the FMLA, and USERRA, and be eligible to receive workers' compensation. And all that other good stuff. And yes, I realize that some "normal" jobs are problematic with regards to some of this, which is one reason I'm an activist.

Editing this post to add: Just to be clear, I know that at some schools the grad students already have some or all of these benefits. But I want them to be more ubiquitous. And the canonical excuse that I've seen from university admins who want to deny grad students such benefits is that they are somehow not real workers. I don't want grad students to accept that view of their own work, and allow it to be used against them.

Basically, I want grad student employees to be treated as the grown-up working people they are and not special snowflake children.

It's not like other jobs don't ever require fees from your wages. What do you think a worker's share of health insurance premiums are? What do you think continuing ed or certification requirements are?

And I am currently both a grad student and a full-time non-academic worker, and no, grad students don't do double the work of the rest of the world. There are grad students who are expected to work an exceptional number of hours, and non-academic workers who are expected to work an exceptional number of hours, and many in both categories of workers who are not.

Edited March 20, 2012 by starmaker

[starmaker]

Sigaba, Thank you for wise and helpful advice. It's also been my experience that confrontational people can eat one alive, so I tend to avoid that type.

If you think Eigen's posts are confrontational, you're really going to get eaten alive.

[TakeruK]

Just a note, for comparison: In Canada, we've *recently* (2009 or 2010) made the change so that fellowships and bursaries are no longer considered taxable income if you are a full time student. (Before this change, only the portion above $5000 was taxable income). We pay income tax only on RA and TA work. I noticed that many of my US funding packages just simply indicate an overall funding amount, but in Canada your stipend is clearly divided into its sources.

I think it's reasonable to have your non-work income (e.g. fellowship/scholarships/bursaries) be non-taxable. Doing your coursework is not "work" like any other person, and it's not really "school" like undergrad was. It's more of an apprenticeship since we are required to learn this stuff in order to do our job! However, RA work and TA work is actual work like "regular people" so it makes sense to tax that.

However, in Canada, there are plenty of tax credits available to students (every dollar paid in tuition and fee is an extra dollar you can earn as tax-free income, plus $465/month of tax credits for living expenses meant to cover other costs such as books). So the standard student in Canada will indeed not pay any tax on their stipend, unless you are TA-ing or RA-ing a whole bunch!!

So, I can't really sign your petition since I am not an American, but I hope the information about your neighbours up north can help you!

[Eigen]

TakeruK- could you clarify something for me on Canadian scholarships? Are they usually divided into amounts to pay for tuition and then amounts for room and board?

[juilletmercredi]

I think it's reasonable to have your non-work income (e.g. fellowship/scholarships/bursaries) be non-taxable. Doing your coursework is not "work" like any other person, and it's not really "school" like undergrad was. It's more of an apprenticeship since we are required to learn this stuff in order to do our job! However, RA work and TA work is actual work like "regular people" so it makes sense to tax that.

This is pretty much the reason I was getting at. At my university, my fellowship income is counted as both income and financial aid. The entire amount is counted in my financial aid package (which limits the amount of supplementary scholarships and loans I can get/borrow - because of cost of attendance rules) but it's also taxed, so I can't actually use the entire amount of it. This led to some complications during a few years during which they were telling me that my award exceeded the CoA, so I couldn't get paid for TAing (ummm what) or take out additional loans.

One could also argue that tax-exempt fellowships are an incentive to encourage people to go into doctoral programs, which can build the science and research workforce and the educated workforce, especially since the administration is always hyping that we need to produce more scientists at a high level to compete with other schools. Graduate students are also often not eligible for a lot of the credits that low-income workers are eligible for, because our income is often not counted as wages (mine is a "stipend" and goes in other income, and not a "wage" with a W-2).

I also don't think making our fellowships non-taxable would take away the idea that they are not "real work" - university administrators are going to believe that regardless of whether our stipends are taxed or not, because it is in their best interest to label our work as "not work." Then they don't have to pay us or treat us well.

But I do think that the nature of some of work (at least the stuff that's not work for pay, like a research assistantship or teaching assistantship) IS different. For example, I am on an external fellowship, and I am not an employee of the university. I don't think I should be an employee of the university just by virtue of being a graduate student that does research for my own benefit, nor do I think I should be eligible for things like maternity leave - especially since given that I am not an employee, I can arrange my affairs personally with my advisor if I needed to (or take a leave of absence). Even when I was employed by the university as a GRA, it was a half-time appointment (20 hours a week) I think part-time laborers do deserve rights - I believe strongly in labor rights - but they're not going to get the same kind of leave and benefits as full-time university employees.

I also do not get to deduct tuition remission. In fact, you cannot deduct tuition remission from your taxes; you can deduct your tuition *payments* if you are paying your own tuition. But you don't get to deduct tuition unless you are actually paying it. If the school pays it, you don't deduct it. Why would you be able to deduct something that you don't pay?

In any case, the petition is there - you don't have to sign it, if you don't want to. (Not that I'm stifling discussion, but I don't have an answer to "Why should I sign it?" That's a personal decision.)

Edited March 21, 2012 by juilletmercredi

[Eigen]

Technically, the IRS regards tuition remission as income. But it works out as a wash. For me, I report 40k of income from the tuition remission, and then a 40k deduction for tuition payment.

But I definitely get your point about the encouragement to go into grad school. I just personally think it should come in higher stipends + more funding for grad school. It's what we've been pushing for at our school- more direct funding, less "benefits".

I have an external fellowship as well, and I know all of the Federal programs (NSF, NIH, etc.) are very extensively clear I that they aren't intended to be tax free. So I get your point about not working for the school- I don't, they dont file aW2 on me etc. but on the other hand, I'm considered an independent contractor, and as such report the income as if I were self employed.

And while I see your point about relative amounts, I think a lot of funding agencies count on post-tax income, not per-tax, just like most other employers, but I'm sure there are some that don't.

And I completely agree about the petition- it wasn't my intention to say that you should give me, or anyone else a "reason" to sign, but rather start a discussion about the movement, or even to discourage any that feels strongly about it from signing.

[Behavioral]

I'm definitely in agreement with the notion about fellowships being unfair in that they count as both income and as financial aid (so that it's taxed AND counts against my Cost of Attendance)--my fellowship exceeded my school's CoA, so I couldn't take out any student loans (only apply for personal loans, which is financial suicide). If it's taxed, then it should not be counted against my permission to borrow student loans. 20-25% taxed income makes a huge difference in day-to-day living, and if something as bad as an emergency were to come up, I'd be screwed. I have a decent amount of savings from my FT work pre-grad school, but it is only finite.

[starmaker]

I also don't think making our fellowships non-taxable would take away the idea that they are not "real work" - university administrators are going to believe that regardless of whether our stipends are taxed or not, because it is in their best interest to label our work as "not work." Then they don't have to pay us or treat us well.

Yeah, but why give 'em more ammo?

Personally, I don't understand why TA/RA stipends don't count as credits-eligible wages with W-2s, either. That seems like something grad students could lobby for.

I agree that fellowship students who don't have a service obligation in their fellowship are a weird category for this purpose, and I'm not sure what the right answer is there.

For those who can't get student loans, like Behavioral, you might look at Lending Club (peer-to-peer lending site), as the rates there tend to be lower than those of normal personal loan rates.

[TakeruK]

TakeruK- could you clarify something for me on Canadian scholarships? Are they usually divided into amounts to pay for tuition and then amounts for room and board?

Most major Canadian graduate level scholarships are paid to the student without any requirement that we spend it on any specific expense. The money for the award goes to the University that the student attends and that University's financial office then pays the student (along with any other University awards). Sometimes, if the value of the award is, say, $15k, the government provides $10k with the expectation that the school provides the other $5k. There are sometimes stipulations on the maximum amount of TA work you are allowed to do if you win a scholarship though, since some of these scholarships are meant to cover your "wage" for research work.

There is no "tuition" component because pretty much every graduate student has to pay tuition in Canada (however, our stipends are set at a value to keep this fact in mind). Some schools also have a special award which they might call the "Tuition Award" which is exactly equal to the cost of tuition. But again, in general, the award is paid out to the student first, and then the student pays tuition (although this may happen internally, but our student account will show money going in and out). However, I am pretty sure that the University CANNOT deduct tuition from our (external) scholarships before paying it out to us since they have an obligation to the granting agency to forward the money to us. Scholarships are usually paid at the beginning of each term and that money goes into our bank account and usually we have the choice to either pay the term's tuitions and fees up front, or sign up for an automatic monthly deduction for our convenience.

Also, we get our "real work" (TA/RA pay) separately from our scholarships/fellowships. The former is paid by Human Resources department while the latter is paid by the Financial Awards office. Our "real work" pay includes deductions for income tax, Canada Pension Plan, Employment Insurance, Union dues, everything that a "real person" is subject to. We get pay stubs for the "real work" too and are paid on an hourly basis. For TA work, this is important because all our TA contracts specify an exact number of hours and if we are asked to work more, we get paid more. However sometimes the RA supervisor decides to pay $5000 and then that number is divided by some arbitrary number of hours/week to generate some arbitrary hourly rate.

Finally, when a school makes you an offer they usually say the total value of all your funding sources as well as how much is coming from TA work, RA work (i.e your supervisor), internal scholarships, and top-ups to external scholarships. They will also give you an estimate of how much you're expected to pay in tuition, so that you know what your "take home" pay will be.

Edited March 23, 2012 by TakeruK

[UnlikelyGrad]

Personally, I don't understand why TA/RA stipends don't count as credits-eligible wages with W-2s, either. That seems like something grad students could lobby for.

I agree. If I'm going to be taxed on my stipend, I want it to count as Social Security earnings.

[Eigen]

TakeruK,

Thanks for the info. That actually isn't so different from how it is in the US- the only parts of any funding that are taxable (whether it's TA/RA pay, scholarships, fellowships, etc) are those that are not used to directly pay for educational costs- tuition, fees, required books, etc. Any funding that is used for required school expenses is directly deductible.

What is taxed is the stipends that go towards living expenses, and any other income on top of school expenses.

So as an example (fairly typical in the sciences), lets say you get accepted with funding to a private university, with a tuition of around $40k per year. You're accepted with a "tuition remission" and a TAship with a 25k stipend. On top of the cost of tuition, lets say you have ~$200 per semester in books to buy for classes, and another ~$800-1000 in fees per semester.

When you go to file taxes, you report an income of 65k- the money the school is paying "you" for your tuition remission, and the 25k stipend. Then, you deduct the tuition costs (40k), the book costs ($400) and the fees ($2000), leaving you with a "taxable" income of $22,600.

It's rare in many fields to have tuition charged to (at least) doctoral students, and while most schools don't list it as a dollar amount in the funding offers, it is considered "income" by the IRS if you look through their publications.

I agree. If I'm going to be taxed on my stipend, I want it to count as Social Security earnings.

This must be school dependent. Our TA/RAships do count as SS earnings. Fellowships count as "self-employment income", so you can "choose" to pay into SS or not from it, depending on your circumstances.

Edited March 23, 2012 by Eigen

[InquilineKea]

Hmm, isn't there a student exemption from the SS tax though?

http://www.irs.gov/c...=120663,00.html

https://en.wikipedia.org/wiki/Federal_Insurance_Contributions_Act_tax#Exemption_for_certain_full-time_students

FICA (Social Security and Medicare) taxes do not apply to service performed by students employed by a school, college or university where the student is pursuing a course of study. Whether the organization is a school, college or university depends on the organization’s primary function. In addition, whether employees are students for this purpose requires examining the individual’s employment relationship with the employer to determine if employment or education is predominant in the relationship.

Edited March 24, 2012 by InquilineKea

[ANDS!]

Most campus's list stipends as being immune from the scourge of FICA. Hell some aren't taxable as personal income either (campus fellowships?).

[InquilineKea]

Oh interesting. Are campus fellowships any different from NSF Fellowships/Fulbright Fellowships in terms of taxability?

[Eigen]

Most campus's list stipends as being immune from the scourge of FICA. Hell some aren't taxable as personal income either (campus fellowships?).

Can you give some examples of fellowships that aren't taxable as personal income? I'm not aware of any.

There are plenty that you can probably get away with not paying (don't show up on W2s or 1098s), but that doesn't mean they aren't taxable as personal income, they just have to be self-reported.

[ANDS!]

I'd have to dig through my Google History but I read fellowships (not a general funding package) from this campus not being subject to income tax filing. It was a nice chart and everything.

[UnlikelyGrad]

Most campus's list stipends as being immune from the scourge of FICA. Hell some aren't taxable as personal income either (campus fellowships?).

You call it a scourge...but for me, it would be GOOD to pay into. (I was a stay-at-home mom for long enough that, at age 40, I still don't have enough "credits" to receive a payout.) It's hard for young people to think about retirement but us older folks think about it a lot. And yes, I do contribute to my Roth IRA every year even though it is a real squeeze.

Eigen: do you really make $40k/year? Wowza.

[Eigen]

Hah. Not even close. That's a bit under what my tuition is, though. I was just using typical examplesn for tuition and stipends in chemistry and related fields averaged over several universities.

I think some of the Ivies fund close to 40k in chemistry, though. Sime of the big state schools as well. And the DoD SMART grant is a bit over 40k per year.