There are two broad categories of grad student income: employee income and awarded income. Both types of pay are supposed to be reported in the ‘wages’ line on your tax return, Form 1040 Line 1. Read on for the relevant tax code references.

Where to Report Employee Income

Employee income comes from work and is reported on a Form W-2. Assistantships, whether research, teaching or graduate, provide the grad student with employee income. Postdocs often hold employee positions as well. This type of grad student and postdoc income is the same to the IRS as employee income from other sources.

Your gross yearly employee income will appear in Form W-2 Box 1, and the income tax that has been withheld from you pay will appear in Box 2 (federal), Box 17 (state), and Box 19 (local).

Form W-2 contains instructions for the employee (p. 7):

Where to Report Non-Compensatory Grad Student Income

Non-compensatory income is given as an award and is not in exchange for work. Scholarships and most fellowships are forms of non-compensatory work. Non-compensatory pay will be officially reported to the student on a 1098-T in box 5 or on a 1099-MISC in box 3. It also might be unofficially reported on a courtesy letter or not at all.

Please note that when you calculate the taxable portion of your non-compensatory income for the year, you have two choices for what to do with your qualified education expenses: to take a deduction or a credit.

Scholarship and fellowship income that is reported anywhere other than on a W-2 or not reported at all should also be added to the ‘wages’ line on your tax return alongside the letters SCH.

The Wages Line on the 1040

The 1040 instructions dictate that W-2 income should be reported in line 7 (p. 21):

Publication 970 says that fellowship and scholarship income should be reported in line 7 (p. 7):

The Wages Line on the 1040A

The 1040A instructions dictate that W-2 income should be reported in line 7 (p. 23):

Publication 970 says that fellowship and scholarship income should be reported in line 7 (p. 7):

The Wages Line on the 1040EZ

The 1040EZ instructions dictate that W-2 income should be reported in line 1 (p. 10):

Publication 970 says that fellowship and scholarship income should be reported in line 7 (p. 6):

Parent post: Grad Student Income Tax Guide: 2015 Edition

We at Personal Finance for PhDs are not tax professionals, and none of the content in this section should be taken as advice for tax purposes.

 

The purpose of this guide is to help you enter your proper income and qualified education expense data into Turbotax so that it generates an accurate tax return for you. This guide uses the free version of TurboTax.

Before you begin, please review the 2016 tax guide home page to gather all the forms you need. If you do not have documentation for all of your income (both compensatory and non-compensatory), you will need to do some calculations before you start entering data into TurboTax.

The common combinations of tax documents that grad students receive are:

• I received a W-2 for my stipend and a 1098-T for my scholarship income and qualified education expenses.
  • Read: How to enter W-2 stipend income into TurboTax
  • Read: How to enter 1098-T fellowship stipend and scholarship income and qualified education expenses into Turbotax
• I received a W-2 for my stipend and no documentation for my scholarship income and qualified education expenses.
  • Read: How to enter W-2 stipend income into TurboTax
  • Read: How to enter undocumented fellowship stipend and scholarship income into TurboTax
• I received a 1098-T for my stipend and/or scholarship income and my qualified education expenses.
  • Read: How to enter 1098-T fellowship stipend and scholarship income and qualified education expenses into Turbotax
• I received no documentation for my stipend and/or scholarship income and qualified education expenses.
  • Read: How to enter undocumented fellowship stipend and scholarship income into TurboTax
• I received a 1099-MISC for my stipend and a 1098-T for my scholarship income and qualified education expenses.
  • Read: How to enter 1099-MISC fellowship stipend income into TurboTax
  • Read: How to enter 1098-T fellowship stipend and scholarship income and qualified education expenses into Turbotax
• I received a 1099-MISC for my stipend and no documentation for my scholarship income and qualified education expenses.
  • Read: How to enter 1099-MISC fellowship stipend income into TurboTax
  • Read: How to enter undocumented fellowship stipend and scholarship income into TurboTax

If you made estimated tax payments on your fellowship income, you will also need to enter your estimated tax payments into TurboTax. Read: How to enter estimated tax payments into TurboTax

Related article: Paying Income Tax throughout the Year

Even if your income and expenses don’t exactly match one of the above scenarios, you can likely combine them to figure out how to report all of your income and qualified education expenses.

Parent post: Enter Your Grad Student Income into Tax Software

We at Personal Finance for PhDs are not tax professionals, and none of the content in this section should be taken as advice for tax purposes.

Grad students frequently choose to prepare their federal and state tax returns using tax software, but using software to prepare an accurate return is not always as straightforward as it should be. The difficulty grad students may encounter when using tax software depends on the type(s) of tax documentation their universities and funding sources send them. Before you start using tax software, you’ll need to think about your grad student income and assess the tax forms you received.

These guides include step-by-step instructions for entering your grad student income and qualified education expenses into different brands of tax software. Preparing the remainder of your return, which might include other sources of income and non-educational deductions and credits is up to you to research.

For the purposes of these guides, I imagined a hypothetical grad student with stipend income.

The ‘personal information’ relevant to the student’s taxes is:

• 24 years old
• single
• living in Durham, NC
• not a dependent; doesn’t have dependents

The student received a $25,000 stipend. Her scholarships totaled $22,000 and her qualified education expenses totaled $20,000. If she had taxes withheld, they were $1,500 for federal tax and $1,000 for state tax.

How to enter your grad student income and qualified education expenses into TurboTax (2016 Edition)

Parent post: Grad Student Income Tax Guide: 2016 Edition

We at Grad Student Finances are not tax professionals, and none of the content in this section should be taken as advice for tax purposes.

 

Welcome to the 2016 edition of the Grad Student Income Tax Guide! While no one really wants to shell out money in taxes, it is part of our civic duty. Our intention with this Guide is to make the process of preparing your grad student tax return as easy as possible. Grad student non-compensatory income (fellowship, scholarship, training grant, etc.) is unfamiliar to many people, including tax preparers, but it’s actually not that complicated to understand and report properly. This tax guide applies to US graduate students who are US citizens, though other students in the US may find aspects of it illuminating.

We here at Grad Student Finances are not tax or financial professionals; nothing you read on this site is advice and you are still entirely responsible for the accuracy of your tax return(s). At every possible point, we will provide references to the tax code to substantiate the steps in the guide.

 

Think about Your Income and Assess Your Tax Forms

Before you start working on your tax return for the year, you must think about what your true taxable grad student income is and assess the tax forms you received from you university. Skipping this step and jumping straight into preparing your return may result in confusion, frustration, incorrect returns, and even the over- or under-payment of your tax due.

Before you begin: Think about your income and assess your tax forms.

Where Your Grad Student Income Should Be Reported on Your Tax Return

It’s also important to understand where your grad student income should ultimately be reported on your tax return. For how confused tax software and tax preparers get over this issue, it has a surprisingly simple answer.

Educate yourself: Find out where your grad student income goes on your tax return.

Tax Return Preparation Methods

The first big step you’ll take toward preparing your income tax return is to choose what method to use. Generally, your options are to prepare it yourself (manually), to use tax software, to outsource it to a professional, or to outsource it to a relative or friend. There are pros and cons to each method, and your decision should largely depend on the complexity of your (tax-related) life and the resources available to you.

If you have a simple (tax) life, the fastest and easiest route to prepare your tax return may be to do it manually. We have provided a step-by-step method for manually calculating and reporting your grad student income. How to incorporate your other income sources and possible deductions/credits into your return is up to you to research.

If you choose to outsource the preparation of your tax return, you should still look over the manual guide so that you can double-check that your grad student income has been calculated and reported correctly.

Probably the most popular route grad students take to prepare their tax returns is to use tax software. While this is probably the least expensive way to have a comprehensive return prepared by a ‘professional,’ because the software is not designed with grad student (non-compensatory) income in mind, it can often be tricky to get it to properly interpret the information you give it. We have generated step-by-step instructions with screenshots for entering your grad student income into tax software (for the rest of your return, you can follow the software prompts).

Further reading: What Method Should You Use to Prepare Your Tax Return?

Understanding Your Grad Student Taxes

At the end of the day, what you need is an accurate tax return, but it’s also highly beneficial to understand how your financial life as a graduate student fits in with the tax code. The best resource for learning about it is IRS Publication 970. If you understand the types of income you (may) receive as a graduate student, you can prevent yourself from falling for the tax lies that are pervasive at universities and answer questions such as can a graduate student contribute to an IRA? To be a financially literate citizen, you should also understand concepts like marginal tax brackets, credits, and deductions.

We at Grad Student Finances are not tax professionals, and none of the content in this section should be taken as advice for tax purposes.

You may have received money or benefits from quite a few sources of the course of a calendar year. Some of that money is taxable income and some of it is not. In this article, we will focus only on the income and expenses related to your role as a graduate student. Those income sources and relevant expenses might be documented by official tax forms generated by your university and/or funding source, but in some cases the university is not required to.

Your sources of income as a graduate student may or may not be readily apparent to you.

The most obvious source of income is your stipend, or the money you are given to pay for your living expenses. Your stipend may be compensatory (given in exchange for work) or non-compensatory (given as an award).

If your stipend is from an assistantship, your university will provide you with a W-2. This type of documentation indicates that your stipend is taxable compensation or earned income.

If your stipend is from a fellowship (or training grant), your university might report your fellowship income officially on a 1098-T in box 5 or 1099-MISC in box 3. However, your university or funding source is not required to report your fellowship to you or the IRS, so it may send you an informal courtesy letter or no documentation whatsoever. This type of documentation or lack of documentation indicates that your stipend is not taxable compensation or earned income. (Any “fellowship” income that is given in exchange for work will be reported on a W-2 and is compensatory.)

Related articles:

• What is a 1098-T?
• What is a 1099-MISC?
• What is a courtesy letter?

A less obvious source of income is the money that pays for your university-related benefits such as your tuition, required fees, and health insurance premium. This money is scholarship income, which is non-compensatory. Similar to fellowship income, the official documentation of scholarship income will be on a 1098-T, but it also may not be reported to you at all.

Related article: What is a 1098-T?

Another important element in this equation is your qualified education expenses. Tuition, for example, is a qualified education expense, while health insurance may not be. You can find a more complete list of qualified education expenses in Publication 970 in each chapter (the definition of qualified education expenses changes with the education tax benefit you are trying to take). Your university may add up your qualified education expenses for the year and report them on a 1098-T, or it may not.

Related article: What are qualified education expenses?

If you don’t receive a 1098-T from your university, you can still figure our your scholarship income and qualified education expenses by viewing the transactions in and out of your student account (which may be termed your Bursar or Cashier’s account or have another name). It’s also a good idea to check the amounts reported on your 1098-T against these transactions. You may have additional qualified education expenses that did not pass through your student account, such as money you spent on required textbooks.

Before you begin preparing your tax return, make sure you can answer these questions:

1. What amount of compensatory stipend pay did I receive? What amount of non-compensatory stipend pay did I receive?
2. What documentation did I receive or not receive for my stipend?
3. Did I have any scholarship income? If so, what is the total amount and is there documentation?
4. Did I have any qualified education expenses? If so, what is the total amount and is there documentation?

Use the answers to these questions to help you prepare your tax return.

Parent post: Grad Student Income Tax Guide: 2015 Edition

We at Grad Student Finances are not tax professionals, and none of the content in this section should be taken as advice for tax purposes.