Do grad students pay taxes on both stipend and tuition reimbursement under new tax laws?

Are you positive about this? My daughter's university sent her a 1098-T that included both her stipend and tuition waiver as income, and said she needs to pay taxes on the entire amount. Now I'm confused :

The 1098-T form only reports qualified tuition and related expenses paid to the institution and any scholarships/grants received - it shouldn't include stipends. Stipends are typically reported on a W-2 if it's for work (like a teaching or research assistantship) or a 1099-MISC if it's a non-service fellowship. For the tuition waiver specifically, if your daughter is a teaching or research assistant, the waived tuition should be tax-free under Section 117(d)(5). However, if her stipend is a fellowship with no work requirement, different rules might apply. I'd recommend having her talk to the university's financial aid or payroll office to clarify exactly how they're classifying each component.

Does it work with scanned documents? My daughter's university only provides paper copies of everything and their online portal is useless.

I'm intrigued but skeptical. How does it deal with the different classifications of stipends? Mine is technically a "fellowship" not an assistantship, which I've heard makes the tax situation even more complicated.

Yes, it absolutely works with scanned documents! You can either upload photos taken with your phone or scanned PDFs. It uses some kind of AI to extract all the information regardless of format. For fellowships versus assistantships, it actually handles this distinction really well. It asks you specific questions about your funding arrangement (whether you're required to teach/research or if it's a no-service fellowship) and then applies the correct tax treatment. My funding switched mid-year from a teaching assistantship to a research fellowship, and it correctly identified the different tax treatments for each period.

Wait, how does this actually work? The IRS hold times are legendary - there's no way to skip the queue, is there?

This sounds like a scam. Nobody can magically get you through to the IRS faster than anyone else. They probably just put you on hold themselves and then connect you when an agent finally answers.

It's not about skipping the queue - they use an automated system that calls the IRS repeatedly using the right phone tree options, waits on hold for you, and then calls your phone when they get a human on the line. So instead of you personally waiting on hold for hours, their system does it for you. They don't promise immediate access - just that you don't have to be the one sitting there listening to the hold music for hours. When I used it, it took about 17 minutes to get through, which was miraculous compared to my previous attempts.

Thanks for mentioning this! I just texted him and he said he is working as a research assistant and will be getting a W-2. Does that change anything about the tax situation with the tuition waiver?

That's good news! Since he's working as a research assistant and receiving a W-2, the tuition waiver should definitely be tax-free under Section 117(d)(5). The W-2 will show only his stipend as taxable wages, and the tuition waiver should not appear as taxable income anywhere. When filing, he'll report the W-2 income normally, but the tuition waiver won't need to be reported. If the university provides any documentation about the tuition waiver amount, keep it for your records, but it shouldn't need to be entered on the tax return.

The Lifetime Learning Credit is great but remember there are income limits. If the stipend is his only income (24.5k) then he should be fine, but if he has other income that pushes him over the limit, the credit starts phasing out. Always worth checking tho!

This is such excellent advice about record keeping! I wish someone had told me this when I started grad school. My university changed their payroll system twice during my program and suddenly forms that used to be available online disappeared. One thing I'd add - if your son's program involves any conference travel or research expenses, keep those receipts too. Even if the university reimburses him, there might be tax implications or opportunities for deductions depending on how the reimbursement is handled. My advisor never mentioned this and I missed out on some legitimate deductions my first couple years. Also totally agree about the side work complexity. I did some tutoring on the side and had no idea I needed to track that as self-employment income. Ended up owing quarterly taxes I wasn't prepared for!

Welcome to the community! Great questions - let me help with those follow-ups: 1. For the W-2 situation, most universities do withhold federal and state taxes from stipend payments, but often not enough. Grad student stipends are treated as regular wages, so they'll withhold based on standard tax tables, but they might not account for things like the standard deduction properly. I'd recommend having your son check his first few paystubs to see what's being withheld and compare it to what his actual tax liability might be. If it looks low, he can submit a new W-4 to increase withholding or make quarterly payments. 2. For record-keeping, definitely save: the W-2, any documentation about the tuition waiver (sometimes called a "tuition remission letter"), the 1098-T if the university sends one, and any official correspondence about his funding package. I'd also recommend taking screenshots of any online portals that show the funding breakdown, since these can disappear when systems change. 3. Common mistakes in later years include: not updating tax withholding when stipend amounts change, forgetting to report any summer funding that might be processed differently, and not keeping track of education-related expenses that could qualify for deductions. Also, if he switches from RA to TA or vice versa, the paperwork might change. You're being such a supportive parent by helping him get organized early!

This is such an important point about summer funding! I wish I had known this when my daughter started her program. Her first summer she got what she thought was just a continuation of her regular stipend, but it turned out to be classified as a fellowship with zero tax withholding. We ended up scrambling to make estimated payments in the fall when we realized what had happened. One thing I'd add is to also ask about how conference travel funding and research expense reimbursements are handled. My daughter's program sometimes gives students money upfront for conferences (which might be taxable) versus reimbursing expenses after the fact (usually not taxable). The timing and classification can make a big difference come tax time. @185bf088fa41 For your son's 5-year program, I'd definitely recommend having him check with the graduate coordinator each year about any changes to funding structure, especially as he transitions from coursework to dissertation phases. Some programs change how they classify students once they advance to candidacy, which can affect the tax treatment of their funding.