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Scholarship/Fellowship Taxes

Tax Implications and Reporting Requirements of Payments to U.S. Citizens, Permanent Residents

Non-Taxable Fellowship—A fellowship payment received by a candidate for a degree, also called a “qualified scholarship” payment by the IRS, is not taxable income to the student if it is used only for tuition and required fees and/or course related expenses, such as fees, books, supplies and equipment that are required of all students enrolled in courses. These payments are not taxable income to the student and there is no requirement for the University of Chicago to report these payments to the student or to the Internal Revenue Service (IRS).

Taxable Fellowship—A payment, typically known as a stipend, used for living and incidental expenses such as room and board, travel, equipment, i.e. computer or other expenses that are not required of all students enrolled in courses. There is no requirement that a recipient perform any services for the benefit of the University as a condition of receiving the stipend payment. These payments are taxable income to the student. The Internal Revenue Service regulations and notices state that the payer (The University of Chicago) of the taxable stipend is not required to withhold income tax and not required to report the payment to the student at calendar year end. Therefore, stipend payments issued to students who are US citizens, permanent residents or resident aliens (for US tax purposes) will not be reported on IRS Form 1099-MISC at the end of the calendar year. Students are responsible for reporting these payments and remitting any tax due. Therefore, if necessary, students should file a declaration of estimated tax (IRS Form 1040-ES and Illinois Form IL-1040-ES) and pay quarterly installments of tax on the stipends. Failure to file the declaration may subject you to interest on any under-payment of tax when you file your income tax return for the year. Please review IRS publication 970, Tax Benefits for Education, or contact the IRS if you need assistance filing your US tax return.

Taxes for Alien Foreign Nationals

Residents for Tax Without a Tax Treaty

Treated just like a US citizen is, tax wise.
Federal taxes—not withheld at source. Will be required to report and remit taxes on this income when filing a US tax return. Will receive a letter from Payroll Services at year end.
State taxes—not withheld at source. Will be required to report this income when filing a US tax return.
No FICA Required.

Residents for Tax With a Tax Treaty

Federal taxes—no taxes will be withheld. Stipend is reportable in the US, although there will be no tax liability in the US. Will receive form 1042-S at year end.
State taxes—no taxes will be withheld. Stipend is reportable in the US, although there will be no tax liability in the US.
No FICA Required.

Nonresidents for Tax Without a Tax Treaty

Federal taxes—taxes will be withheld at a rate of 14% for F and J visa holders, all others = 30%. Will receive form 1042-S at year end.
State taxes—not withheld at source. Will be required to report this income when filing a U.S. tax return.
No FICA Required.

Nonresidents for Tax With a Tax Treaty

Federal taxes—no taxes will be withheld. Stipend is reportable in the US, although there will be no tax liability in the U.S. Will receive form 1042-S at year end.
State taxes—no taxes will be withheld. Stipend is reportable in the US, although there will be no tax liability in the U.S.
No FICA Required.