Douglas Olsen
The University of Kentucky offers graduate students assistantships and fellowships that carry bi-weekly stipends. These stipends are considered taxable income by the university. However, the taxability of stipends can vary depending on the specific circumstances and the student's location. In general, scholarships, fellowship grants, and other grants can be tax-free if they are used for qualified expenses, such as tuition and required fees, books, supplies, and equipment. On the other hand, stipends are often considered taxable income when they are used for living expenses or other incidental costs. It is important for students to understand the tax implications of their stipend and seek appropriate guidance to ensure they are complying with tax regulations.
| Characteristics | Values |
|---|---|
| Are stipends taxable? | Yes, all stipends are taxable income. |
| What is a stipend? | A stipend is a payment for which no services are rendered or required. |
| What is the stipend rate? | The withholding tax rate is 30% for nonresident aliens (NRAs). The rate may be reduced to 14% if the student or scholar has an F-1, J-1, M-1, or Q-1 visa. |
| Are scholarships and fellowship grants taxable? | They can be. If the scholarship or grant is used for expenses other than qualified expenses, it is taxable income. |
| What are qualified expenses? | Tuition, required fees, books, supplies, and equipment. |
What You'll Learn
Stipends are taxable income
The University of Kentucky considers all stipends as taxable income. This is in line with the Internal Revenue Service (IRS), which treats most stipends as taxable income.
Stipends are a unique form of financial compensation intended to support specific activities or cover living expenses rather than serve as wages for employment. Despite their distinct purpose, stipends are often subject to taxation. The IRS categorizes stipends as pre-tax, non-taxable, and taxable benefits. The taxation of a stipend depends on its intended use. If the stipend is used for qualified education expenses, such as tuition, books, or fees, it may be tax-free. However, if the funds are used for non-qualified expenses, such as rent, travel, or food, the stipend amount allocated to these purposes is considered taxable income.
Stipends for non-job-related expenses, such as personal wellness programs, are generally considered taxable income. Wellness stipends for gym memberships, fitness classes, or wellness products are taxable income. Similarly, remote work stipends for home office equipment, internet service, or other remote work expenses are taxable unless they meet specific IRS criteria. Most meal stipends are also taxable, except when employees must remain on-site during their meal breaks, in which case the stipend can be considered non-taxable.
When a stipend is classified as taxable income, it must be reported on the employee's W-2 form and included in their gross income. This will result in an increase in the amount of tax owed at the end of the year. Employers must withhold taxes from taxable stipends, and the applicable federal income tax, Social Security, and Medicare taxes must be withheld based on the employee's tax bracket.
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Scholarships and fellowships may be tax-free
The University of Kentucky offers a range of scholarships and fellowships to its students. These opportunities are available for both incoming freshmen and graduate students. The university is a leader in using extensive data assessment to evaluate students for scholarship awarding, including heavily weighing a student's unweighted high school GPA.
The University of Kentucky offers various types of scholarships and fellowships, including assistantships, tuition scholarships, and fellowships funded by the Graduate School. Assistantships and fellowships carry a bi-weekly stipend and may cover tuition costs. All stipends are considered taxable income. Tuition scholarships can cover the standard graduate tuition, Johnson Center fees, and health fees, but they do not include student-specific fees such as lab fees, course fees, or program fees. The Graduate School Funding Office administers approximately 2,000 tuition scholarships for graduate assistants and fellowship holders each semester. These scholarships come from various sources, including endowments, university scholarship accounts, and Research Challenge Trust Funds.
Students interested in scholarships and fellowships should contact the relevant Director of Graduate Studies (DGS) and the appropriate college or department to learn more about specific opportunities and procedures. The University of Kentucky's Office of Student Financial Aid and Scholarships also offers an online scholarship platform called Scholarship Universe, which matches students to relevant external and internal scholarship opportunities.
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Stipends for nonresident aliens are subject to withholding tax
The University of Kentucky considers all stipends as taxable income. This includes stipends for nonresident aliens, which are subject to withholding tax.
Stipends for nonresident aliens are generally subject to withholding tax when paid by US institutions. The standard withholding tax rate is 30%. However, this rate may be reduced to 14% if the nonresident alien is temporarily in the US on an "F", "J", "M", or "Q" visa. These individuals are considered to be engaged in US trade or business. In this case, the withholding tax only applies to the taxable portion of the grant.
Nonresident aliens who are students, scholars, or researchers may be eligible for tax treaty benefits, such as an exemption from tax, if their country of residence has an income tax treaty with the US. To claim these benefits, they must complete the required forms, such as Form W-8BEN, with the university's Tax Department.
It is important to note that the tax implications may vary depending on the specific circumstances and the nature of the stipend. It is always advisable to consult with a tax professional or the university's Tax Department for specific guidance on tax obligations.
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Stipends can be used for living expenses
A stipend is a fixed sum of money paid periodically to trainees, interns, students, apprentices, and clergy members. Stipends are often used to offset certain expenses and are usually offered as compensation for training instead of salaries for employment purposes. Stipends are taxable income, and the recipient must withhold their own taxes if they are not deducted by the issuer.
Stipends are commonly used to cover living expenses, such as housing, food, and travel. They can also be used to cover the cost of a gym membership or health insurance. Additionally, stipends may be offered to cover specific costs, such as the purchase or lease of computers during academic semesters.
The University of Kentucky offers graduate students assistantships and fellowships, which carry bi-weekly stipends and may cover tuition costs. These stipends are taxable income.
When determining whether to accept or negotiate a stipend, it is important to consider if the stipend will effectively cover living expenses. It is also worth researching what similar positions receive for stipends and inquiring about other benefits that may be available if a raise is not an option.
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The University of Kentucky offers fellowships with stipends
The University of Kentucky offers graduate fellowships with stipends, tuition scholarships, and student health plan enrollment. These fellowships are funded by the Research Challenge Trust Fund and endowed by the Lexmark Corporation. The amount of the stipend varies depending on the degree being pursued, with PhD students receiving an annual stipend of $20,000 and Master's students receiving $10,000. These stipends are provided bi-weekly and are considered taxable income.
To be eligible for a fellowship, students must be enrolled full-time in a Ph.D., Ed.D., or D.M.A. program and have completed at least two semesters in their current graduate school academic program. Additionally, students must be preparing for a career in college or university teaching. Applicants are required to submit an essay describing how their pursuit of graduate education reflects the values of the fellowship's namesake, Lyman T. Johnson, who was the first Black student to enroll at the University of Kentucky in 1949. The application must also be accompanied by a letter of support from the program's Director of Graduate Studies.
The University of Kentucky also offers fellowships specifically for graduating seniors who plan to continue their post-baccalaureate education in one of the University's graduate or professional programs. These fellowships are funded by the Board of Directors of the University of Kentucky Athletics Association and provide awards of up to $20,000. Preference is given to Kentucky residents and first-generation college students.
In addition to the University-wide fellowships, the Department of Civil Engineering at the University of Kentucky offers fellowships and assistantships with competitive stipends, full tuition and fees coverage, and student health insurance. These opportunities are available for both Master's and PhD students, including international students.
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Frequently asked questions
Yes, all stipends are considered taxable income.
A stipend is a payment for which no services are rendered or required. It is generally used for living expenses such as room and board, travel, and personal computers.
Stipends from the National Health Service Corps Scholarship Program, the Armed Forces Health Professions Scholarship and Financial Assistance Program, or a comprehensive student work-learning-service program are tax-free.
Scholarships and fellowship grants are generally tax-free if they are used for qualified expenses, such as tuition and required fees, or for books, supplies, and equipment.
Qualified expenses are defined by the Internal Revenue Service (IRS) and include tuition, required fees, and other course-related costs such as books, supplies, and equipment.
