Tax Reporting of Fellowship Income

For non-employee research fellows and students

This document is produced for informational purposes only, and should not be

considered tax, financial or legal advice. Please consult your own tax or financial

advisor with any questions.

What is a fellowship?

A fellowship is any amount paid or allowed to, or for the benefit of, an individual

to aid such individual in the pursuit of study or research. A fellowship may take

the form of: (i) payment(s) to the recipient, such as stipend payments; (ii)

reimbursement or payment of expenses, such as travel expenses, to or on behalf

of an individual; or (iii) a credit against an existing term bill or a reduction in the

amount owed by the recipient to an educational organization in connection with

the pursuit of study or research.

Are fellowships treated as taxable income in the U. S.?

Fellowship payments are taxable, unless they are excluded from

taxable income under Section 117(a) of the Internal Revenue

Code.

Fellowship amounts are nontaxable where:

• The recipient is an individual, who is a candidate for a degree at an

educational organization such as Harvard University (i.e., undergraduates

or graduate students, but not post docs); and

• The fellowship amount is used for "qualified tuition and related expenses."

Qualified tuition and related expenses include tuition and fees required for

the enrollment or attendance of a student at an educational institution,

such as Harvard, and fees, books, supplies and equipment required

for

courses of instruction at such an educational organization.

Fellowship amounts are taxable

where:

• Amounts are used for room, board, travel, clerical help, equipment,

incidental living expenses and other expenses not

required for enrollment

in or attendance at Harvard University;

• Amounts are given to non-degree candidates, such as post docs; or

University Financial Services 617-496-6800

• The fellowship grant is conditioned upon either past, present, or future

services by the recipient, or upon services that are primarily for the benefit

of the University.

Note: NRSA fellowship grants: Training program stipends under certain

fellowship programs, such as NRSA awards under the NIH research

training fellowships, do not represent compensation for services. That is

because the stipends are not paid for or in connection with the

performance of services, but are grants to participants to enable them to

pursue programs of independent research, training, and original study,

focusing on the experience to be gained by the recipient, rather than on

the University’s benefit.

Are fellowships subject to FICA?

Fellowship amounts are subject to FICA only if they are deemed to be “wages”

for employment tax purposes. Whether fellowships are wages is an inherently

factual determination, requiring consideration of all relevant facts and

circumstances of the program.

Will there be withholding from non-employee fellowship amounts?

(This depends on your tax status in the U.S.)

If you are a nonresident alien for U. S. tax purposes, there will be withholding

from your fellowship income, unless you qualify for and are granted a tax treaty

benefit, which reduces or eliminates tax withholding. In the absence of a tax

treaty benefit, the withholding rate depends on the type of visa held. For F, J, M,

and Q visas, the withholding rate is 14%; for all other visas, the withholding rate

is 30%.

If you are a U. S. citizen or resident alien for U. S. tax purposes, the University

will not withhold from your non-employee fellowship payments. Therefore, you

should consult your personal tax adviser to determine whether or not you should

be making estimated tax payments with respect to your fellowship income.

Are there tax treaty benefits available for nonresident aliens who receive

fellowship amounts?

Availability of tax treaty benefits varies with country of origin. Please contact

University Financial Services if you wish to apply for a tax treaty benefit with

respect to your fellowship amounts (1033 Massachusetts Ave, 2

floor / 617-

496-6800).

University Financial Services 617-496-6800

Will I receive a tax reporting form from the University showing fellowship

amounts?

The answer depends on your tax classification in the U. S. The University is not

required to report fellowship amounts for U. S. citizens or individuals, who are

resident aliens for tax purposes, on a Form 1099 or other formal tax document.

Therefore, it is important to keep your own records or to seek a summary from

your department in order to have the information necessary to prepare your

personal tax return.

If you are a nonresident alien for U. S. tax purposes, then you will receive a Form

1042-S, showing fellowship amounts for each calendar year, in the spring

immediately following the relevant calendar year.

Are there IRS publications, which can help me to prepare my personal

income tax return, showing fellowship income?

In preparing your personal income tax return, please consult with your own tax

advisor, because University Financial Services is not authorized to provide

individual tax advice. You may, however, find it helpful to read the IRS

publication relevant to your personal situation:

• If you are a U. S. citizen or resident for tax purposes, who received

fellowship amounts for studying, teaching or researching in the U. S., then

see IRS Publication 970, Tax Benefits for Education, which is available at

http://www.irs.gov/publications/p970/index.html

• If you are a U. S. citizen or resident alien for tax purposes, who received

fellowship amounts for studying, teaching or researching outside the U. S.,

then see Publication 54, Tax Guide for U. S. Citizens and Resident Aliens

Abroad, which is available at http://www.irs.gov/pub/irs-pdf/p54.pdf.

• If you are a nonresident alien for U. S. tax purposes, who received

fellowship amounts for studying, teaching or researching in the U. S., then

see Publication 519, U. S. Tax Guide for Aliens, which is available at

http://www.irs.gov/pub/irs-pdf/p519.pdf

•

Federal income tax forms and publications can be downloaded from the

IRS web site at http://www.irs.gov

•

Massachusetts income tax forms and publications can be downloaded

from the Massachusetts Department of Revenue (DOR) web site at

http://www.dor.state.ma.us/forms/FormsMenu2.htm.

Once at the MADOR web site:

University Financial Services 617-496-6800

For individual state tax guides please use the navigation path below;

Home › Individuals and Families › Personal Income Tax › Current Year

Tax Information ›

Additional information regarding the taxation of nonresident aliens in the U. S.

can be found on the University International Office web site at

http://www.hio.harvard.edu/taxesandsocialsecurity/