Implications for Fellowships vs. Assistantships

There are different tax implications for graduate fellows and graduate assistants. There are also different implications for domestic and international students. Details of these implications are addressed below.

The interpretation and implementation of the tax laws is the domain of the Internal Revenue Service (IRS). OGSPS takes no position on the status of a particular taxpayer, nor does it have the authority to dispense tax advice. Students should consult a tax expert for advice. That stated, modest guidance on stipend taxability is provided here.

Graduate Fellows (True Fellow) - Part of the payment (stipends that are used for meals, lodging, non-mandatory medical insurance, travel, personal living expenses or other non-course-related expenses) made to a graduate fellow is taxable income. Other parts of the payment (portions used for tuition and fees required for enrollment or attendance at the University and/or other mandatory fees, such as books, supplies, and equipment required to be used by all students in a particular course of study) are not taxable.

• According to the IRS, a portion of fellowship (stipend) payments may be subject to income tax.
• Students who are pursuing a degree may exclude from taxable income the part of the fellowship applied to tuition and fees required for enrollment or attendance or for the purchase of books, supplies, and equipment required for courses.
• The portion of the fellowship used for room and board or personal items must be reported as taxable income.
• The IRS does not allow the University to withhold income tax on fellowships. Therefore, a Form W-2 Wage and Tax Statement will not be issued at year end. Consequently, taxes may be owed when a tax return is filed.
• Additional information about the taxability of fellowships is provided in Internal Revenue Service Publication 970, Tax Benefits for Education.

• According to the IRS, the University must withhold 14 percent federal income tax from fellowship (stipend) payments, unless the student is exempt from tax because of a treaty between his or her country of residence and the United States. The Purdue University Payroll Department will notify international students of the procedures to obtain this exemption.
• A nonresident alien is required to complete Form 1040NR and return it to the IRS, even if his or her fellowship is exempt from tax.
• More information about the taxability of fellowship payments to nonresident aliens is provided in IRS Publication #519, U.S. Tax Guide for Aliens.

Graduate Assistants (Fellowships Administered as Assistantships) - Students with fellowships administered as assistantships are considered employees of the university.  Therefore, the salary earned from this position is subject to withholding for income tax, social security, and Medicare tax and is reported on the W-2 at year end.