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.