PhD fellowships and 529s: tax and spending advice

[Anonymous]

Anyone BTDT and have a tax preparer or book that they’d recommend for help with sorting this stuff out?

Specific questions involve housing; which expenditures from which pocket; retirement contributions; and extricating $ from 529 when ed costs are covered by uni.

[Anonymous]

There is no double dipping. If the U pays your qualified expenses, you cannot use the money from the 529 without paying tax. No penalty, but you do have to pay the tax on the growth.

The 529 list of expenses is broader than the scholarship list. Pub 970 of the IRS discusses this.

[Anonymous]

I don't know a single person who ever received a PhD that began saving for retirement IN the PhD program. 529 can pay for room and board. So, you're probably looking at $15k per year in potential 529 distributions for room and board. Don't be an idiot and save for retirement. PhD sucks. You need to socialize and try to live a decently comfortable life despite being impoverished. Create networks with your friends who may become future coauthors. Engage in as much relaxation as possible when you're not working. You'll barely pay any taxes anyway because you are poor. Getting a tax preparer would be a terrible idea. Just use one of the online filing services. You will be able to declare your fellowship income, your 529 distributions, and you'll likely be taking the standard deduction. So, your taxes are quite simple.

[Anonymous]

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.

[Anonymous]

Funny. My son is making 300k/yr at FAANG while pursuing his PhD

[Anonymous]

Anonymous wrote:Funny. My son is making 300k/yr at FAANG while pursuing his PhD

I think that poster was talking about full time doctoral students, not workers who are getting their PhD part-time. Obviously, that is a different story, since your employer is probably contributing to your retirement. Don't be so smug!

[Anonymous]

Anonymous wrote:

Anonymous wrote:Funny. My son is making 300k/yr at FAANG while pursuing his PhD

I think that poster was talking about full time doctoral students, not workers who are getting their PhD part-time. Obviously, that is a different story, since your employer is probably contributing to your retirement. Don't be so smug!

+ many. What a jacka$$.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Funny. My son is making 300k/yr at FAANG while pursuing his PhD

I think that poster was talking about full time doctoral students, not workers who are getting their PhD part-time. Obviously, that is a different story, since your employer is probably contributing to your retirement. Don't be so smug!

+ many. What a jacka$$.

Total jackass. Can’t claim both things at the same time: “my kid is typical so what’s your problem?” and “isn’t my child special?” Either way, the poster is a dick.

[Anonymous]

Anonymous wrote:I don't know a single person who ever received a PhD that began saving for retirement IN the PhD program. 529 can pay for room and board. So, you're probably looking at $15k per year in potential 529 distributions for room and board. Don't be an idiot and save for retirement. PhD sucks. You need to socialize and try to live a decently comfortable life despite being impoverished. Create networks with your friends who may become future coauthors. Engage in as much relaxation as possible when you're not working. You'll barely pay any taxes anyway because you are poor. Getting a tax preparer would be a terrible idea. Just use one of the online filing services. You will be able to declare your fellowship income, your 529 distributions, and you'll likely be taking the standard deduction. So, your taxes are quite simple.

This poster is correct. There is no need for a preparer unless you have a ton of other assets you aren’t mentioning.

Also read this

https://www.treasury.gov/resource-center/tax-policy/Documents/Report-Pell-AOTC-Interaction-2014.pdf

[Anonymous]

I agree with poster above who asked Why save now? Do things to help you best reach your goal of actually finishing your PhD. Take breaks, trips, go to the gym, go to conferences, lead a balanced life so you can finish and move forward.

[Anonymous]

Anonymous wrote:I agree with poster above who asked Why save now? Do things to help you best reach your goal of actually finishing your PhD. Take breaks, trips, go to the gym, go to conferences, lead a balanced life so you can finish and move forward.

+1 Or just plain eat better.

It isn't a time to save for retirement, unless your parents are rich and helping you (no shame in that).

[Anonymous]

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.

[Anonymous]

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.

I think that the last part just changed in December with the passage of the Secure Act.

[Anonymous]

Anonymous wrote:I don't know a single person who ever received a PhD that began saving for retirement IN the PhD program. 529 can pay for room and board. So, you're probably looking at $15k per year in potential 529 distributions for room and board. Don't be an idiot and save for retirement. PhD sucks. You need to socialize and try to live a decently comfortable life despite being impoverished. Create networks with your friends who may become future coauthors. Engage in as much relaxation as possible when you're not working. You'll barely pay any taxes anyway because you are poor. Getting a tax preparer would be a terrible idea. Just use one of the online filing services. You will be able to declare your fellowship income, your 529 distributions, and you'll likely be taking the standard deduction. So, your taxes are quite simple.

You’re making a lot of assumptions that are inaccurate.

[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.

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.