Hi! Long-time lurker here. Couldn’t sleep last night, so I kind of went down the rabbit hole on this one (lol). I haven’t seen anyone post about this, so I figured I’d throw it out there: According to Kaiser, “Institutional grant aid for living expenses, as well as the cost of the waived health insurance coverage, may be considered taxable income by the Internal Revenue Service.
Students are strongly encouraged to consult a qualified tax professional to determine any tax implications.” I wanted to know if anyone else has looked into this? Obviously $ with taxes owed is better than no money, but this is important to recognize/understand regardless! I’m wondering how monthly budgeting might work given there could be a lot of expenses due to commuting to all of the clinical locations and planning for about $4,000-5,000 in state/federal taxes at the end of the year.
https://medschool.kp.org/content/dam/internet/kp/som/homepage/student-life/2020-2021 Catalog.pdf
Topic No. 421 Scholarships, Fellowship Grants, and Other Grants | Internal Revenue Service
I did a cursory calculation below:
$34,500 Living Expenses Stipend (increasing 3% each year)
+ $6,538 Their Estimated Cost of Waived KP Insurance
= $41,038
- $12,200 Standard Deduction for Single Person in 2019
= $28,838 AGI —> federal taxes due: $3,267 plus potential State Income Tax (CA): I had no idea how to do this one, but I used an online tool to estimate ~$1,025. Lastly, even though scholarships used for living expenses are taxable, they are usually exempt from FICA. So, estimated total tax burden: $4,292 — That’s about $360/month.
Anyway, this might be most helpful for the handful of admitted students on here, but still!! I’m gonna guess that their estimated expenses might be slightly inflated to account for this (hopefully) or else, budget with this in mind!