PhD fellowships and 529s: tax and spending advice

[Anonymous]

Anonymous wrote:

Anonymous wrote:I saved for retirement in a Roth IRA during my PhD, but I could only do that the years I was a TA, worked on the side, or was given a fellowship as W-2 income. If you don't get a W-2 you still owe income tax (a big misunderstanding among some fellow students!), but it doesn't count as "wages" toward retirement contributions or the child care tax credit. THAT sucks.

Has that been officially decided by the IRS or a tax court?

There was a Nature article in the 2000s that said fellowship stipends for full time students as well as tuition subsidies were in an unclear tax situation.

That article is probably wrong. Or not applicable in general.


Grad student wages in certain eligible jobs are not subject to fica, but it is still income. Scholarships are subject to the scholarship rules: tax free if the expenses are qualified, and subject to income taxation if the expenses are not.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I saved for retirement in a Roth IRA during my PhD, but I could only do that the years I was a TA, worked on the side, or was given a fellowship as W-2 income. If you don't get a W-2 you still owe income tax (a big misunderstanding among some fellow students!), but it doesn't count as "wages" toward retirement contributions or the child care tax credit. THAT sucks.

Has that been officially decided by the IRS or a tax court?

There was a Nature article in the 2000s that said fellowship stipends for full time students as well as tuition subsidies were in an unclear tax situation.

That article is probably wrong. Or not applicable in general.


Grad student wages in certain eligible jobs are not subject to fica, but it is still income. Scholarships are subject to the scholarship rules: tax free if the expenses are qualified, and subject to income taxation if the expenses are not.

PP is correct. For how little we made in graduate school/postdoc, my ex-husband and my taxes were a mess once we were on fellowships.

[Anonymous]

^^TA/RA with a W2 was fine. It was just the federal fellowships (NSF and NIH) that were a bit of a mess. In postdoc my advisor had dual affiliation with UC Berkeley and Lawrence Berkeley National Lab. I was first employed as a normal W2 employee at LBNL. Then I got an NIH fellowship and switched by affiliation to UC Berkeley, but since Berkeley is unionized to pay above the NIH payscale, I got an additional W2 from Berkeley in addition to my NIH fellowship. Of course taxes were not withheld from my fellowship, but were from my W2s. My fellowship was FICA inelligible, but my W2 work wasn't. And I had two W2s and an additional form. Anyway, I had to do a lot of finagling with TurboTax to get it all to work out.

[Anonymous]

DC is a new graduate student this year with a fellowship that covers tuition/fees plus a little more than a $30k stipend with no teaching requirement. The University does not report the stipend to the IRS or withhold any taxes. Legally/technically, students are supposed to pay income taxes, but the IRS does not know about the income. (https://www.irs.gov/taxtopics/tc421). So some/many students choose not to file or pay taxes on the stipend. DC chooses to report and pay taxes. We are giving her a gift equal to the taxes she's paying. When DC starts teaching, the university will issue a W-2 because the payment becomes wages and paying/filing taxes becomes unavoidable.

We closed DC's 529 when she graduated college. But we could have chosen to keep contributing in to it to get the state tax deduction and withdraw from it to send to her for rent. You only need to keep receipts as evidence of qualified education expenses. On the retirement account side, she has enough earned income for us to put $6000 in a Roth IRA in her name.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I saved for retirement in a Roth IRA during my PhD, but I could only do that the years I was a TA, worked on the side, or was given a fellowship as W-2 income. If you don't get a W-2 you still owe income tax (a big misunderstanding among some fellow students!), but it doesn't count as "wages" toward retirement contributions or the child care tax credit. THAT sucks.

Has that been officially decided by the IRS or a tax court?

There was a Nature article in the 2000s that said fellowship stipends for full time students as well as tuition subsidies were in an unclear tax situation.

Pretty sure it has been — university websites are saying so, at least wrt stipend. Not clear to me yet whether tuition benefit is taxable income.

Read pub 970.

[Anonymous]

If you are in school full time with no wages you can still get the CDCTC. Someone above said you can’t. There are special rules for students (wages are deemed to be $250 per month while in school full time)

Just google and read.