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I'm currently in the process of applying for various scholarships to fund my PhD.

Many scholarships mention explicitly the approximate amount per year of the scholarship. This is usually the amount excluding tuitions, so the amount mentioned is intended to be a stipend to cover living expenses.

I've never seen it mentioned anywhere, nor could I find a definite answer of this online: will this stipend be taxed? E.g., should I subtract a certain percentage off the scholarship amount that's mentioned, to calculate my real monthly income? Does this depend on the country the scholarship is given in, or are there international agreements on this?

I'm in the initial stages of setting up my PhD programme, therefore I'm in contact with professors in New Zealand, Australia, the United States and Canada, so ideally, answers to my question apply to any of these countries. If it's relevant: I'm a dual citizen (European/American Citizen).

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Depends on country, undoubtedly. –  Dave Clarke Aug 21 '12 at 6:33
    
have you found out what is the tax percentage in New Zealand? I cannot find a way to send you a private message –  user4050 Dec 4 '12 at 18:03
    
Helpful discussion at sbseminar.wordpress.com/2010/03/23/… –  David Speyer Dec 5 '12 at 21:02
    
@user4050: No, I had to postpone the start of my PhD till next year, so I stopped exploring all this some time ago. But next year I'll probably have to dig into it again, so if you find the answer....please share :) –  Rody Oldenhuis Dec 6 '12 at 8:38
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4 Answers 4

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Taxation does depend very much on the country, as well as the type of award you receive. The amounts similarly vary from nation to nation. To give two examples:

  • In the US, scholarships and fellowship stipends are taxed as ordinary income. However, in some cases, for externally funded awards, you need to be careful, as the university might not withhold taxes. In that case, however, you would need to make estimated tax payments, as you are still responsible for paying the tax "on time!" Don't forget that your tax burden may also include state and local income taxes, depending on where you live. Making matters even more complicated, cost of living fluctuates wildly: you're probably better off with a $25,000 award in the midwest than a $35,000 or $40,000 award in New York City.

  • In other countries, the system can vary. In Germany, for instance, graduate fellowships are not taxed, while "standard" graduate positions, which are considered employees of the state, are taxed. At the same time, however, people receiving the taxed positions receive health benefits and pay into the social security system. Stipend recipients are responsible for their own health insurance, and do not accrue time in the social security system.

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Wow...here I was, half-expecting most scholarships (except a few privately funded ones) were exempt from taxes. Seems I've opened up a stinking tar pit of doom... –  Rody Oldenhuis Aug 21 '12 at 9:18
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My graduate stipend was taxable in the US at the federal level. However, there were exceptions at the state (Pennsylvania) and local level. If I was being paid out of grant money to perform "duties necessary for the completion of my degree", then it was not taxable at the state or local level. Those taxes were not taken out of the paycheck in the first place. If I was being paid to teach more than the two semesters it was required, then I got state and local taxes taken out. –  Ben Norris Aug 21 '12 at 11:10
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@DaveClarke Although Dave's answer provides useful info, this answer provides more general, top-level information. In any case, this answer makes obvious that it varies so greatly from country to country, that my question has no clear answer. Therefore, I'll accept this answer as the most satisfying one. –  Rody Oldenhuis Aug 21 '12 at 13:58
    
The stipend is taxable at the federal, and possibly the state level depending on where you live. The tuition waiver however is non taxable. Any grants and loans you may receive are also taxable as income. –  John B Nov 12 '12 at 1:36
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@JohnnyB: It probably comes out as a wash in the end—but students might need to watch out for estimated tax payments. –  aeismail Nov 12 '12 at 22:13
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In Belgium, we have two kinds of ways of paying PhD students. One is a bursary, which is untaxed. The other is a salary, which is taxed. The amount the student gets in the hand is roughly the same, though there are factors such as amount of experience, whether there's a family and/or children, etc, that affect the value.

Whether a bursary or salary was offered depends upon where the funding comes from. In practice, the tasks of the students in each case are the same. No additional money is provided for tutoring, though it is expected that students help out with tutoring and other activities.

Tuition fees (less that 1000 euro per year) are not covered by the scholarship. Money for books is not provided, though in our department students can order books for the library and keep them on their desk for as long as they want to. Sufficient money for conference attendance is generally available, independent of the scholarship, as far as the student is concerned (which means, managed collectively by the supervisor).

Belgian PhD students earn a comparatively good amount of money, I think almost the highest among PhD students in Europe. (I can't find a reference for that at the moment.)

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Would the salary come out of tutoring (or similar), so "non-PhD related labour"? Or is that the part of the scholarship that's left over after tuition fees, books, expenses for conferences, etc. (PhD related labour)? Or both? :) –  Rody Oldenhuis Aug 21 '12 at 7:15
    
I've updated my answer. Let me know if it doesn't answer your questions. And note that it applies only to Belgium, but perhaps only to Flanders or even just KU Leuven or our department. –  Dave Clarke Aug 21 '12 at 7:26
    
I agree with most of what has been said. To add up to it, in UCLouvain grad students are typically either salaried teaching assistants (which takes around 1/3 of total time or less) or untaxed bursaries who are forbidden from teaching or any other work, at least for a FNRS/FRIA scholarship. –  Kurt Aug 23 '12 at 11:04
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When thinking about taxation you need to consider how tuition and fees are handled. Under some circumstances, you could be responsible for paying tax on the money used to pay your tuition.

You also need to think about minimum earnings. If your only income is your scholarship, the tax burden will be small. If you have additional income, then the additional tax burden from the scholarship could be very large.

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So in other words, before starting to work for extra income, I should make a few calls and check if the "extra income" will result in a net loss of income? –  Rody Oldenhuis Aug 22 '12 at 9:49
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@RodyOldenhuis yes, but in most countries negative income cannot happen. What I mean is that the increase in tax liability associated with a scholarship (or extra work) can be very different between two people. The tax liability of someone with no other income might increase by less than 10% of the value of the fellowship, while the tax liability for someone with a lot of other income might increase by 50% of the value of the fellowship. –  StrongBad Aug 22 '12 at 9:55
    
Is this a theoretical or real-world issue? I don't think I've heard of anyone being taxed on tuition coverage, but I'm certainly not an expert. –  Anonymous Mathematician Aug 22 '12 at 21:24
    
@AnonymousMathematician real-world (at least to the extent that the US is real-world): See example 2 at irs.gov/publications/p970/…. I have been told that in the humanities example 1 also is relevant since some scholarships are all "teaching income". –  StrongBad Aug 23 '12 at 8:01
    
I think it's important to point out that an important criterion for taxing tuition benefits is that you need to get the money. If the scholarship pays the money for tuition directly to your university (as many do), then you're not normally responsible for the taxes on it (unless you get a form declaring it as income). –  aeismail Jun 13 at 17:04
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I am in a similar situation. Based on my research on departments in Canada, Australia, and the US, as already been mentioned the stipend is always taxed. Sometimes though you are in a lower tax bracket.

EDIT: I found this information about the UK

Income Tax 58. Payments made as part of a NERC studentship are not regarded as income for income tax purposes.
Students should note, however, that earnings received during the final year from sources such as teaching and demonstrating should be aggregated with income from post-award employment when assessing income tax liability for the tax year in which the award ends.

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I think your UK research is mistaken. Training awards such as PhD stipends are exempt from tax. –  EnergyNumbers Nov 11 '12 at 17:02
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