Know anything about Fellowships and Taxes? - Mothering Forums

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Old 02-19-2007, 01:38 PM - Thread Starter
 
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I started our taxes yesterday and hit a snag. A big one. It looks like we are not going to be getting much back because dh is a grad student and gets paid through a Fellowship.

From what I understand the IRS can tax the Fellowship but we can't use it as Earned Income for the EIC. Does that even make sense? There is no W-2 or any form for the money he receives from the Fellowship. The only form we get is a 1099-T for $2600 that they give him at the beginning of the semester for books and what not.

We are claiming the Fellowship money as misc on our taxes because it seems like you would have to. Is that right? Is there something I am missing?

I have called the IRS and school and am getting conflicting answers. Right now if we claim the Fellowship money we get hardly anything, but without it we are getting what we thought we would. Dh also has income from the beginning of the year.

Anyone know anything about this?

TIA!
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Old 02-19-2007, 02:07 PM
 
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Yep, I do know something about this (it's what I do professionally). And yeah, you're right--the fellowship is probably taxable (depends a bit on what kind of fellowship it is) and should be reported as misc income. However, you can write off his actual school expenses (books, etc.). But yeah, it will cut way way into your refund, because taxes weren't taken out of it as you go along.
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Old 02-19-2007, 02:11 PM - Thread Starter
 
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How do I figure out if its taxable or not.

The Fellowship committee is so unhelpful.

Also, why does the Fellowship not count toward the EIC?

Thanks so much!
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Old 02-19-2007, 02:13 PM
 
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If you can say a bit more about what type of fellowship it is (university, gov't, etc.), I can probably help you.

As for counting towards EIC, all I can tell you is that the gov't doesn't count fellowship money as "earned" income. I (and I'm sure you) disagree with this, but that's how they figure it, and they, unfortunately, make the rules.
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Old 02-19-2007, 02:34 PM - Thread Starter
 
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dh's Fellowship is from a private party. I guess it is through the university. A married couple who are alumni founded a fellowship for grad students. The students have to attend seminars and classes a few times a month and they have other obligations.

Thanks for the speedy replies!
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Old 02-19-2007, 02:43 PM
 
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Yep, that's taxable under misc income. Sorry.
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Old 02-19-2007, 04:34 PM
 
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check your pm.

I think the rule is that if you pay for academic related costs with fellowship money, it's not taxable. That's what my DH was told and he had one last year.
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Old 02-19-2007, 07:02 PM
 
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No, I'm pretty sure they're taxable... I did a Foreign Language and Area Studies fellowship, and it was taxable although they didn't take taxes out of it. Good thing that was the tax year that DS was born, or we would have been in a pickle!

The EIC thing cuts both ways... we had other earned income, so we ended up getting a big chunk of extra EIC payment because the fellowship wasn't considered income at all for purposes of the EIC, so we got to deduct it from our earned income and got a bigger credit.

Spending all of my money and time on this wild, wild life.
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Old 02-19-2007, 07:52 PM
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This was helpful to me:
http://www.irs.gov/pub/irs-pdf/p970.pdf

Basically, the amount not used to pay for books, tuition, and required fees is taxable - the part used to pay for those things is not taxable. However, if you used a fellowship to pay for those things then you can't use those expenses for either of the educational credits (Hope or Lifetime Learning).

And yeah, if either of you have any earned income you can file for EIC based on that...

dar
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Old 02-19-2007, 08:13 PM - Thread Starter
 
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Thanks everyone!

Dar-I think we live in the same town. My dh is at KU.
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Old 02-19-2007, 11:40 PM
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Hey, me too! And Rain will be there in the fall...

I want your husband's fellowship!

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