Does a Graduate School Stipend Count as Income?

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Stipends used for required educational expenses may be free from federal income taxes.
Stipends used for required educational expenses may be free from federal income taxes. (Image: Stockbyte/Stockbyte/Getty Images)

An advanced degree at the master's or doctorate level may translate into greater employment opportunities and higher wages within your career field, but graduate school can be expensive. There are a number of ways students can finance their graduate level studies, including student loans, grants, scholarships and stipends. The Internal Revenue Service considers some of these funds to be reportable and taxable as income.

Stipend

The Internal Revenue Service defines any stipend received by a graduate student as a fixed sum of money paid on a regular or period basis either to help defray expenses or in exchange for services rendered, such as teaching a class as a graduate assistant. The IRS does not make a distinction regarding the term used to describe the stipend. It may be called a fee or stipend, but the IRS considers it to be the same as a wage or salary. The school that pays the stipend should provide you with a Form W-2 detailing the amount you were paid and any amounts withheld.

Federal Income Taxes

Whether your stipend is taxable is dependent on your educational status and how you use the money. Your graduate student stipend is fully taxable if you are not a candidate for a degree. If you are a degree candidate, you can deduct any amount of your stipend that was used to pay for required tuition, fees, books, supplies and equipment. You cannot deduct any portion of your stipend that was used for non-educational purposes such as commuting to class or living expenses like room and board.

Wages

Your graduate school may pay you a stipend in exchange for conducting research, teaching a class, grading papers or other functions. The Internal Revenue Service considers such payments to be taxable wages. Your graduate school may or may not withhold federal income taxes from your stipend, and may or may not supply you with a W-2 or other documentation at the end of the year. You are still responsible for reporting your stipend and paying any applicable taxes, regardless of whether or not you received documentation from your graduate school.

Reporting

The Internal Revenue Service does not require graduate level programs at universities and colleges to report scholarship or fellowship income on either a Form W-2 or Form 1099, although some institutions may do so. Graduate programs are not required to withhold taxes from these disbursements. Graduate programs that pay a stipend in exchange for services should provide the student with a Form W-2. You must report the taxable portion of your stipend on Line 7, Form 1040, regardless of whether you received a W-2 or Form 1099.

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