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Can anybody tell me if the MSTP annaul stipend is taxed or not? If it is taxed, any idea what the rate is? Thanks!
MSTP Stipend??
- Thread starter klpitter23
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It's going to vary from place to place. Standard disclaimer applies: I'm a MD/PhD student, not an accountant. That being said the whole touchy legal thing and the fact that so few MD/PhDs seem to do their own taxes always made it hard for me to get a straight answer on this.
We should all pay federal income tax for the stipend income + health insurance, and without actually going through my old tax returns that worked out to something like 12-13%. As far as I can tell, we don't have to pay self-employment tax on fellowship income, so we get a big break there. In my state of PA, we are exempt from state income tax. The city of Philadelphia taxes us at half the usual city tax as some sort of old compromise deal. That tax is only withheld during the thesis years here, but increased my tax burden a few percent during my PhD (?).
The screwy thing is that depending on where your money is coming from your tax situation can change. I don't fully understand the complexity here, I only know that one day they weren't withholding my federal taxes and the next day they were
If your school isn't withholding your federal income taxes you have to pay on it quarterly (form 1040ES).
We should all pay federal income tax for the stipend income + health insurance, and without actually going through my old tax returns that worked out to something like 12-13%. As far as I can tell, we don't have to pay self-employment tax on fellowship income, so we get a big break there. In my state of PA, we are exempt from state income tax. The city of Philadelphia taxes us at half the usual city tax as some sort of old compromise deal. That tax is only withheld during the thesis years here, but increased my tax burden a few percent during my PhD (?).
The screwy thing is that depending on where your money is coming from your tax situation can change. I don't fully understand the complexity here, I only know that one day they weren't withholding my federal taxes and the next day they were
If your school isn't withholding your federal income taxes you have to pay on it quarterly (form 1040ES).- Joined
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Thanks for the info, sounds like I have a little more digging to do 
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Stipend I got during my Ph.D work was taxed. I don't remember the rate, but it is the lowest tier so around 10%.
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FYI:
No matter what, you owe Federal Tax on any money you receive that does not go towards tuition, fees, and required stuff for your courses. Therefore your living stipend is taxable.
source:
http://www.irs.gov/individuals/students/article/0,,id=96674,00.html
(see "Taxable Scholarships and Fellowships")
However, the question is in what situations do you get taxes garnished on your stipend. The federal government makes a subtle difference between receiving a fellowship for training and getting paid wages in return for work. Essentially, the IRS thinks that a training fellowship (F31/F32, DOD, etc. or if you're fully funded on a slot on the main MSTP training grant) is a gift, while if you're paid from your mentors R01 or similar grant you are considered as personnel paid wages working to complete that grant.
If you get a portion or all of your stipend paid from an R01, you will get your taxes withheld, and you will receive a W-2. If you have a F31 or you're in your medical school years, you are not "working for pay", and you don't receive a W-2, and you don't get your taxes garnished.
A few notes:
1) Even if you don't have a W-2, you still owe taxes! And since you don't get taxes withheld, you have to pay-as-you-go - otherwise you will pay a penalty to the IRS.
2) If you have you taxes withheld, there is an advantage - working for pay is defined as "earned income" which means you can qualify for a Roth IRA, for which the tax sheltered benefits and compounded appreciation between now and your retirement probably far exceed the small amount of taxes you pay now.
3) Depending on your jurisdiction, state and local payroll taxes may or may not be withheld depending on the source of your stipend. Check with your payroll and accounting department for more information.
No matter what, you owe Federal Tax on any money you receive that does not go towards tuition, fees, and required stuff for your courses. Therefore your living stipend is taxable.
source:
http://www.irs.gov/individuals/students/article/0,,id=96674,00.html
(see "Taxable Scholarships and Fellowships")
However, the question is in what situations do you get taxes garnished on your stipend. The federal government makes a subtle difference between receiving a fellowship for training and getting paid wages in return for work. Essentially, the IRS thinks that a training fellowship (F31/F32, DOD, etc. or if you're fully funded on a slot on the main MSTP training grant) is a gift, while if you're paid from your mentors R01 or similar grant you are considered as personnel paid wages working to complete that grant.
If you get a portion or all of your stipend paid from an R01, you will get your taxes withheld, and you will receive a W-2. If you have a F31 or you're in your medical school years, you are not "working for pay", and you don't receive a W-2, and you don't get your taxes garnished.
A few notes:
1) Even if you don't have a W-2, you still owe taxes! And since you don't get taxes withheld, you have to pay-as-you-go - otherwise you will pay a penalty to the IRS.
2) If you have you taxes withheld, there is an advantage - working for pay is defined as "earned income" which means you can qualify for a Roth IRA, for which the tax sheltered benefits and compounded appreciation between now and your retirement probably far exceed the small amount of taxes you pay now.
3) Depending on your jurisdiction, state and local payroll taxes may or may not be withheld depending on the source of your stipend. Check with your payroll and accounting department for more information.
