Fellowships: Taxable?

[nackteziege]

Are fellowships with no specific work requirement taxable?  One school has awarded me a university fellowship but I want to consider taxes when making my decision.  It's my understanding that assistantships that come with a work requirement taxed.

[guttata]

Yep, they're still income. Taxable.

[fuzzylogician]

Taxable, but in a different way than assistantships (for some purposes). For example, my country has a tax treaty with the US under which assistantships are exempts up to a certain amount but fellowships are completely exempt regardless of the amount. For US citizens this difference in the source of funding doesn't matter, afaik.

[tarrman]

Check out this link: http://www.irs.gov/taxtopics/tc421.html

 

Only the stipend you receive is taxable, and only if you spend it on non-school items (like housing, travel, personal expenses, etc.) The portion of the stipend you spend on textbooks and school supplies is not taxable.

[-Star-]

Check out this link: http://www.irs.gov/taxtopics/tc421.html

 

Only the stipend you receive is taxable, and only if you spend it on non-school items (like housing, travel, personal expenses, etc.) The portion of the stipend you spend on textbooks and school supplies is not taxable.

 

They must be required/mandatory school supplies. If you just happen to want to buy a computer/printer/notebooks/etc, it is still taxable. If you are required to buy a text book for a class, then it is not taxable. 

[nackteziege]

But: http://grad.berkeley.edu/financial/faq.shtml

 

"Federal taxes are not withheld from fellowships awarded to U.S. citizens and permanent residents."

 

Are they saying they aren't withheld so you'll have to pay them come filing time?

Edited April 9, 2013 by nackteziege

[Eigen]

Yes, they aren't withheld so you have to pay them on filing. 

 

And if you'll owe more than $1000 at the end of the year (likely), you need to file and pay quarterly taxes. 

[nackteziege]

What?!  Is there a way for me to calculate this or should the school tell me these things?  Why can't they just withhold them?

[Eigen]

They probably can if you ask them, although you might end up paying more that way.

There are a number of decent tax calculators out there, or you could look at the IRS tax tables for your projected income.

[sunscapee]

OHHHHHHH NOOOOOOOO my stipend is taxed???  Can grad student get food stamp??  Because if not I am force to eat ramen noodely doo 6 out of 7 days a week.

[anacron]

As someone who is currently on a department fellowship and filed taxes, they do not withhold taxes on fellowship stipend because the university does not consider it payment for work (i.e. they do not generate a W2). If you read the IRS publication about fellowships, they are non-taxable if the stipend went towards educational expenses (tuition, fees, books, etc). Housing/living costs are taxable and should be reported as income.

 

Your university should generate a yearly tuition expenses/fellowships form (I think its a 1098 or something) which will report your fellowship stipend. After reading up on the IRS material it wasn't too hard to file my taxes.

 

The usual disclaimer applies: I'm not a tax advisor blah blah blah =D

[nackteziege]

OHHHHHHH NOOOOOOOO my stipend is taxed???  Can grad student get food stamp??  Because if not I am force to eat ramen noodely doo 6 out of 7 days a week.

 

That's not really my concern, my real concern is that I don't know anything about taxes and I want to make sure that I'm prepared to do what I'm supposed to do (I'd never heard of quarterly filing, for example).  I'm also asking about a fellowship which is paid significantly differently than the stipend I have now; I apparently misread something somewhere and wanted to make sure I was considering my financial aid offers fully.  I'm not complaining about having to pay taxes.

 

And actually, students often do qualify for food stamps.  I probably would.

 

 

Thanks for the information, all.

[Eigen]

As someone who is currently on a department fellowship and filed taxes, they do not withhold taxes on fellowship stipend because the university does not consider it payment for work (i.e. they do not generate a W2). If you read the IRS publication about fellowships, they are non-taxable if the stipend went towards educational expenses (tuition, fees, books, etc). Housing/living costs are taxable and should be reported as income.

 

Your university should generate a yearly tuition expenses/fellowships form (I think its a 1098 or something) which will report your fellowship stipend. After reading up on the IRS material it wasn't too hard to file my taxes.

 

The usual disclaimer applies: I'm not a tax advisor blah blah blah =D

 

Just as a note, my 1098 does not show my stipend, since it's not exactly a scholarship. 

 

My 1098 just shows the university tuition waiver. And my W2 shows any extra TAing I do over my fellowship. 

 

Generally, my understanding is that a 1098 will only show a scholarship if it's from University funds (I could be wrong), just as a W2 will only show work done for the institution as an employee. 

 

Since a lot of fellowships come from external sources, and are just paid "through" the institution, the institution doesn't report those either place. 

 

My fellowship isn't reported anywhere, directly, I just have to report it as "other" income, as described in the IRS publication linked above. 

 

For the most part, schools don't give out much information- even NSF won't give out any information on the taxability of it's fellowships. The reason being, they don't want to get in the middle of it, or be potentially held liable. So they just say that you should "follow the appropriate tax laws".