Is Graduate Fellowship Money Taxable Income for Federal & State Taxes?

So fellowship taxation can be tricky but I can help clear things up. Fellowship money is generally taxable except for the portion that pays for qualified education expenses (tuition, fees, books, supplies required for courses). Since your tuition is paid separately, the money you're receiving for living expenses (housing, food, etc.) is indeed taxable on your federal return. You'll need to report this as "income" even though you won't receive a W-2 or 1099 form. This is considered "unearned income" but still taxable. For Pennsylvania state taxes, the rules are similar - fellowship stipends used for living expenses are taxable income. You should keep track of your total fellowship amounts for the year. When you file your taxes, you'll report this income on Form 1040, line 1 with "SCH" written next to it (for scholarship/fellowship). There's no withholding, so you might want to make quarterly estimated tax payments to avoid a big tax bill when you file.

After spending hours going in circles with tax questions about my research stipend last year, I finally tried using https://taxr.ai and it was a complete game-changer! I uploaded Publication 970 and asked specific questions about my fellowship situation (super similar to yours - grad student, stipend for living expenses). The AI analyzed the tax publication and explained exactly which parts applied to my situation. It broke down the difference between qualified and non-qualified expenses and helped me understand why my living expenses portion was taxable but not subject to withholding. Saved me so much confusion trying to interpret all the tax jargon myself.

Just wanted to follow up! I tried https://taxr.ai after seeing the recommendation here and it was exactly what I needed. I was really stuck on whether my research fellowship qualified for any tax exclusions, and within minutes I had clear answers. The thing I found most helpful was being able to ask follow-up questions. After getting the basic info about what portions were taxable, I asked about specific expenses like my research materials and conference travel. Got super clear guidance on which expenses might offset the taxable portion. Definitely feeling more confident about handling this correctly now!

I had the exact same issue last year. After 8 attempts to reach someone at the IRS who actually understood fellowship taxation (kept getting transferred or disconnected), I found https://claimyr.com and used their service to get priority access to an IRS agent. You can see how it works here: https://youtu.be/_kiP6q8DX5c Finally spoke with an IRS tax specialist who confirmed that fellowship stipends for living expenses are taxable, but they're reported as "other income" and don't require self-employment tax. The agent also explained that while my university wasn't required to provide any tax forms, they should at least give me a letter stating the amount I received for my records. The best part was getting a clear answer about estimated tax payments - turns out I needed to make them to avoid an underpayment penalty!

I need to eat my words from my previous comment. After another frustrating morning of trying to get through to the IRS myself (3 hours on hold before getting disconnected!), I broke down and tried Claimyr. Within 45 minutes, I was actually speaking with an IRS representative who specialized in education credits and scholarship taxation. The agent confirmed everything about fellowship taxation that people mentioned here AND helped me understand how to handle the reporting since I won't get any official tax forms. They even explained the specific codes to use on my tax return so it wouldn't trigger unnecessary flags. Definitely worth it for the peace of mind alone.

Just to add one more consideration - check if your university offers free tax assistance for students. Many schools have volunteer tax assistance programs that specialize in situations like yours. My university had a dedicated tax advisor just for international and fellowship students who helped me figure everything out without having to pay for a professional. Also, don't forget that you might be eligible for education tax credits like the Lifetime Learning Credit even while on fellowship. That can help offset some of the tax burden from your taxable fellowship income.

Um, isn't there a tax exemption for scholarships and fellowships? My roommate is on a full-ride scholarship and she told me she doesn't pay taxes on any of it. Super confused why some people have to pay taxes on this stuff and others don't...