<p>Our new grad student’s tuition and fees are waived, and will receive about $27K/yr support from the university between biweekly wages for a part time TA position, stipends coming at first from the department and later through the research lab, and in a fellowship (paid in one lump check each semester). Are fellowships and stipends reported on W-2 forms? Are they on 1099’s? Are they treated as wages or are they considered as support for educational expenses on tax returns? And can a new grad student deduct moving expenses as if moving for a job (wich they are in that they are doing TA and RA work)? Are there any other expenses that can potentially reduce taxes? I’m thinking educational expenses like textbooks, etc.</p>
<p>I gather that we will still be able to claim an exemption since this student was <24 yrs old, in college with parent-provided support for >5 months in 2012. As such, I think the student should therefore only take one exemption on the W-4 for 2012, but can take 2 exemptions in 2013. Is this correct?</p>
<p>I’m not a tax expert, but S1 is a grad student with a research assistantship. The year he graduated college, we claimed his as an exemption since we supported him for 6 months that year. I believe he only took one exemption that year & changed it the following year. He does receive a W-2 for his stipend. It gets reported as wages on his tax return. He doesn’t have a fellowship, so I don’t know how that’s handled.</p>
<p>S never deducted expenses for books or moving.</p>
<p>We have had kids in grad school in a variety of tax situations the last few years and it is so complicated we have our accountant do their taxes, too.</p>
<p>My understand is -basically, someone paid a fellowship in a lump sum owes taxes but may need to self-report if the university doesn’t provide a tax document, which can happen. Some students won’t report the income. There were W-2s for TA positions. Lab positions started as fellowship with no W-2 but changed to receiving a W-2 at some point in time. It has to do with how their position is being paid, which hasn’t been constant. Our kids were never able to deduct moving expenses, books, etc. However, sometimes they got education tax credits. Hope credit, maybe? One kid was able to be claimed as a dependent, even with a full year fellowship because of the allowance we were giving plus travel expenses. </p>
<p>I have the sense our accountant uses the regular tax software so maybe most of this is possible to just do on your own. However, we had one situation where the office had a discussion including their tax attorney, to make up their minds how to handle it. I figure if the kids ever get audited, we’ve done our best to do this correctly.</p>
<p>Have you read through the 1040 publications? Unless you are using a CPA it’s best to go directly to the source because everyone’s situation is different.</p>
<p>Exemptions - yes 2, but it depends when the student turns 25. i.e If you turn 25 on 12.31.20XX you are considered 25 for the entire year.</p>
<p>Make sure your student looks into free file via e-file on the IRS website. If you make less than X you can youse official tax software for free to prepare your return. Also, any out of pocket expenses, regardless who pays them, are deductible on the student’s tax return. So, if your student claims themselves next year, and you paid 20k for their education, it only can be deducted on their return. </p>
<p>Yes, you can deduct books, tuition, etc, but not the moving expenses. There are several education credits available that you can use, but you may have extinguished those already since the student is a grad.</p>
<p>Some schools report it on a W-2, some on a 1099 and some not at all. Either way it’s taxable to the student. You can still claim them assuming they have not turned 24 if you provided more than half their support. They will most likely not be able to deduct anything because they won’t have enough to itemize.</p>
<p>As far as tax credits, the Lifetime Learning Credit is still available to a grad student. It is all non refundable. It is for tuition and fees (and books/supplies that are required to be bought from the institution - weird caveat). Max credit is $2000 based on 20% of up to $10,000 worth of tuition/fees.</p>
<p>Some universities, especially the office of graduate studies, have info on how taxes are handled or links to get further info about how graduate stipends, etc. are taxed.</p>
<p>I just wanted to clarify something 3bm103 said: Higher education expenses are “above the line” deductions so yes you would be able to deduct them even if you take the standard deduction instead of itemizing. Basically here is how the tax formula works on a simple level:</p>
<p>gross income (includes the $27k from TA position)
-adjustments for gross income (this is where higher education expenses fall in)
=adjusted gross income
the greater of itemized or standard deduction
etc etc theres more after that but irrelevant to your question</p>
<p>Since tuition and fees are waived you obviously can’t take them. However, the books will apply. Here is a list of other expenses that don’t apply and the irs page link</p>
<p>Expenses that Dont Qualify</p>
<p>Qualified education expenses do not include the cost of:
Room and board.
Travel.
Research.
Clerical help.
Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution.</p>
<p>This is true even if the fee must be paid to the institution as a condition of enrollment or attendance. Scholarship or fellowship amounts used to pay these costs are taxable.</p>
<p>For both the tuition and fees deduction and the Lifetime Learning Credit, required books and supplies are only qualified education expenses if they are required to be purchased from the school. Even if it the student buys them from the school, they do not qualify unless buying them from the school is required.</p>
<p>It is a weird (and stupid) rule that does not apply for all education related tax benefits. For instance for the AOC and for 529 accounts, books and supplies are not required to be purchased from the institution in order to qualify as Qualified educational expenses. </p>
<p>I don’t know how common it is for a school to require students to purchase their books from the school. I’m guessing not very. So it seems more likely than not that the student will not be able to deduct them.</p>
<p>Thanks all for the links and advice. Moving expenses can’t be deducted for a part time job (TA or RA)…so that’s out. FinanceGrad, do you suggest that this grad student could possibly simply subtract the course-related expenses for books etc from the fellowship income and only report the balance? I don’t think the fellowship checks which are paid once per semester will be reported on a W-2. And, thanks for the tip about the free filing. </p>
<p>Now to figure out the complications of having gone to college out-of-state, grad school in yet another state, while having stayed a legal resident of our home state but planning to change residency as of September–and all 3 states have an income tax! I feel we will pay more than this student earned if we have to hire a tax professional to sort it all out, but I don’t know where to begin!</p>
