taxation of student stipend

Hi -- I have just started as a grad student in New York City (and I am a US citizen). I receive a stipend for attending school, and from what I understand, it is taxed the same way that any other paycheck would be. Other students have suggested that there is some way to avoid or reduce the amount of taxes applied, if the stipend income is saved away for a certain amount of time before I spend it. That sounds a little too good to be true, but I thought it was worth investigating. Does anyone have any input about this, or any other way that I can increase my net pay? Thanks for any info.

If your stipend is a tuition reduction, rather than a paycheck, then the following may apply:

A tuition reduction for graduate education is tax free if the reduction is provided by an educational institution to a graduate student who performs teaching or research activities for that institution. The qualified tuition reduction must be for education furnished by that institution, and not represent payment for services.


If you're receiving a paycheck, then there are situations where the income is taxable, exempt from soc/sec & medicare, and amounts are not withheld. This applies to students, but am not sure of the exact ruling and whether it applies to your situation.

You may want to check with the schools payroll department, when they're not real busy.

[abezon]

If the stipend covers tuition only and is part of a TA or RA, it's tax free. If the stipend exceeds tuition, it's taxable. If the stipend is part of a work-study financial aid package, it's exempt from social security & medicare deductions. The school's financial aid and/or payroll dept will know how to treat it.