Taxes on a fellowship/T32 training grant ("not in return for services" funding)?

[gliaful]

I can't seem to find a clear answer on this anywhere. I've asked current students what taxes they pay on their stipends but I've gotten different answers.

 

I'm moving to Colorado (I'll be a non-resident for the first year only) and the program I'm entering provides a stipend that is funded by an institutional T32 training grant, as well as a tuition waiver/fees waiver, and insurance.

 

This is not an TA/RA stipend -- it is not in return for direct services. It is just money to "defray the costs of living" (or some similar wording).

 

I know the state income tax rate in Colorado is a flat 4.63% of "federal income tax liability".

This estimator site http://www.tax-brackets.org/coloradotaxtable thinks I will owe $4479 federal income tax + $1319.55 state income tax, for a total of $5798.55.

This is 20.3% of my stipend. I read through a couple other "tax" threads on here and it seemed like between 10-15% is "normal", so I think I'm missing something (especially since Colorado's income tax isn't very high).

 

Can anybody help me understand what I will likely owe? I'm just a single twentysomething with no "special tax situations" (no dependents, not blind, etc) to consider.

[Horb]

Hi! I'm not sure how useful this will be, but taxes paid depends on how you file/what you have regularly deducted. If your school does not take out taxes, then you should check to see if this is actually taxable (some fellowships are not). If it is taxable, then you should look into whether or not you will have to pay quarterly taxes. If you look up on the IRS website, it mentions that if you do not pay quarterly taxes, you can end up being fined/have to pay fees. I don't full understand why they just can't send a bill with taxes owed, but whatever. 

 

As for the amount of taxes: Some states do taxes based on income level. For instance, the first $9,000 of a $15,000 stipend might be taxed as one percentage and then the rest at another, which could reduce your tax from say 20% to 15%. 

 

For what it is worth, I was taken about 20 percent when I worked in retail. I imagine this would be similar to a fellowship, since they both fall under earned income. But I'm not an accountant, so I'm not fully certain if fellowships are indeed taxed differently. 

[Vene]

I'd expect that it's saying you're responsible for that much because it includes FICA. I doubt that a fellowship requires FICA be paid on it, so that should reduce your tax burden a fair bit. If it were for a job, that would be a believable tax rate to me.

[TakeruK]

Indeed, I think you need to subtract FICA taxes (about 6%) when you use these tax calculators. So this would mean you pay about 14% in taxes, which is back in the standard ranges

[rising_star]

Part of the reason you probably can't get a straight answer is that everyone's tax situation is different since things like number of dependents, whether you're married, mortgage or student loan interest deductions, etc. affect one's tax liability. Those are individual so it can be difficult to answer without knowing the specific details of your filing. In addition, if you're a non-resident your first year in CO, you will likely owe some state income taxes on the T32 grant in whichever state you currently reside, though this can vary depending on how much you have made in your current state. Like I said, it's very individual. Focus on whether or not the current grad students in a similar family situation (so without children if you don't have children) find the stipend sufficient to live frugally but comfortably or if they are relying on their parents, partners, or loans to get by.