Post-Stipend Pay

[blinchik]

Hi all,

 

As grad school is becoming more of a reality, I was wondering if anyone could explain to me how taxes are withheld from the stipend (I'm looking at a stipend of ~29k, maybe more). I asked some graduate students at each of the programs I interviewed at, and they said that they are exempt from paying into Social Security and Medicare, and only get federal and state tax withheld (and possibly city tax), which is subject to the various bracket percentages.  I'm hoping this is true, but I'd really appreciate if someone could correct me if I am wrong regarding that. It looks like I'll only have one exemption based on the W4 form. I tried calling the university's payroll/financial aid services center, but wasn't able to get an answer. I'd appreciate any help I could get regarding this (especially from STEM people, since PhD programs seem to be almost universally funded).

Edited February 10, 2015 by blinchik

[TakeruK]

Yes, you have been told correct information about taxes in general (of course, you may have specific cases). I would say you should expect to pay about 13% of your stipend in taxes. However, your school might not automatically withhold your taxes. You should check with them as soon as you start! 

[geographyrocks]

Ditto on the yes. Our taxes are automatically deducted from our monthly "paycheck". Only your prospective school can say whether they are withheld automatically although I believe that is the most common way it is handled.

[Cheshire_Cat]

Good to know.  This is what I thought, but I wasn't sure.  Also, make sure to deduct fees and other education costs from your adjusted gross income if your offer only promises to cover tuition.

[blinchik]

Hey all, thank you for your advice. It sometimes ends up being more than 13%, depending on the state/city tax rates, but usually is no more than 20% for the programs that I am looking at. Also, I did ask about the fees, and the programs that I am looking at waive most if not all fees. Glad to know I'll be taking most of my paycheck home.

[TakeruK]

Hey all, thank you for your advice. It sometimes ends up being more than 13%, depending on the state/city tax rates, but usually is no more than 20% for the programs that I am looking at. Also, I did ask about the fees, and the programs that I am looking at waive most if not all fees. Glad to know I'll be taking most of my paycheck home.

 

What state have taxes up to 20%?? I've heard California has one of the highest state tax rates (it's where I live now) and my effective tax paid is about 13%. Remember that we do not pay the FICA (Social Security and Medicare) taxes, which is another 6% or so (which could explain the 20% number).

[geographyrocks]

My total monthly tax that is withheld is 9.5%.  That comes out to be roughly 7.65% to federal and 1.85% to state.  If this were a normal job, I would be looking at about 20% of my check going to taxes. 

[Cheshire_Cat]

How much taxes is withheld really changes things, budget wise.  I've realized I'm not actually going to be taking home a whole lot less than I am right now, but I won't have all the benefits I do now either.

[Maleficent999]

I attend school in California and they take between 12% - 14% per paycheck.

[blinchik]

When looking at Georgia, I get a 15% federal and state tax rate from a paycheck calculator (excluding the FICA taxes) for the proposed income of 29k. I should have been clearer - I wasn't referring to only state tax, but to the combined federal + state taxes (total taxes, in this case).

Edited February 18, 2015 by blinchik

[Horb]

It depends if you have a fellowship or not. I have one and it is tax free (it also depends on the type of fellowship). I checked with other grad students who filed in previous years; they didn't pay any taxes on fellowship years, but did when they were TAing/RAing. 

[Aroma Black]

It depends if you have a fellowship or not. I have one and it is tax free (it also depends on the type of fellowship). I checked with other grad students who filed in previous years; they didn't pay any taxes on fellowship years, but did when they were TAing/RAing. 

 

This is really not the applicable distinction, unless your fellowship only covers tuition. The IRS says:

 

Scholarships, fellowship grants, and other grants are tax-free if you meet the following conditions:

• You are a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
• The amounts you receive are used to pay for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution.

You must include in gross income:

• Amounts used for incidental expenses, such as room and board, travel, and optional equipment.
• Amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant.

 

In practice, this means that if you have a stipend (above and beyond tuition and fees), the stipend is taxed, even if that money is going to your apartment and groceries. To the IRS, money used for your upkeep isn't treated differently whether you're teaching or not. The only time this makes a difference is if you are using money from your TA/RA work to cover tuition.