If you are the recipient of a scholarship, fellowship, or grant from Rice, this income is taxed and reported differently from employee wages. Your fellowship payments are taxed and reported based on your individual tax residency status in the U.S. If you are a foreign national, please refer to our Foreign National Tax page for more information.
Taxable vs. Non-Taxable Fellowships
In general, a scholarship or fellowship isn’t taxable to you if you are a degree candidate at an educational organization, and the proceeds are used for qualified tuition and related expenses such as fees, books, supplies, and equipment required of all students taking the particular course. If your scholarship payment is applied directly against charges on your university student account, only those qualified expenses on your account are non-taxable.
Any portion of a scholarship, fellowship, or similar grant that is applied for non-qualified expenses is considered taxable to you and should be included in your taxable income when you file your U.S. tax return. Non-qualified expenses are those expenses not required for enrollment or for a particular course, such as room, board, travel, insurance, or general living expenses. For more guidance on qualified vs non-qualified expenses, please see the IRS Pub 970 document. Non-qualified scholarships are generally subject to federal income tax, but not social security or Medicare (aka FICA taxes).
The qualified scholarship rule does not apply if a grant represents compensation for services such as teaching, research, etc. For example, payment for your service as a teaching assistant or research assistant is considered taxable employment income.
General Rules for U.S. Citizens and Resident Aliens
Fellowship Tax Withholding
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Payments applied directly to a student account do not have taxes withheld.
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Fellowship payments processed through the Payroll office do not have taxes withheld.
Fellowship Tax Reporting
- There is no specific tax form required or recommended by the IRS for Rice to report fellowship income for U.S. citizens and residents.
- Fellowship payments are not compensation for services, therefore aren’t required to be reported on a W-2 (employee compensation) or Form 1099-NEC (non-employee compensation).
- Fellowship payments are not a type of income required to be reported on Form 1099-MISC.
- U.S. citizen and resident alien students should self-report the non-qualified portion of their fellowships/scholarships on their tax returns.
Estimated Taxes
- Fellows or other individuals receiving non-qualified payments may need to make estimated quarterly payments to the IRS if you anticipate your tax liability for the calendar year will be $1,000 or more. However, you do not need to pay estimated tax for the current year if you meet all three of the following conditions:
- You had no tax liability for the prior year
- You were a U.S. citizen or resident for the whole year
- Your prior year tax return covered a 12-month period
- Generally, the IRS requires estimated tax payments to be made for the current tax year if both conditions apply:
- You expect to owe at least $1,000 in federal tax for the current tax year, after subtracting federal tax withholding and refundable credits, AND
- You expect your federal tax withholding and refundable credits in the current tax year to be less than the smaller of:
- 90% of the tax to be shown on your current year’s federal tax return, or
- 100% of the tax shown on your prior tax year’s federal tax return
General Rules for Nonresident Aliens
Tax Treaty Benefits
- Nonresident alien students and postdoctoral fellows may be able to exclude a portion or all of their non-qualified fellowship payments from their taxable income for U.S. tax purposes under the terms of an international tax treaty between the U.S. and their country of tax residence. Tax treaty eligibility is based on an individual’s country of tax residence, visa type, and past U.S. visa/immigration history.
- Treaty benefits are only potentially available to individuals with U.S. social security numbers (SSNs) or individual taxpayer identification numbers (ITINs).
- International students and researchers should submit their SSN or ITIN to the University through their Sprintax Calculus (Calculus) account. If tax treaty benefits are available, the necessary tax forms to claim the benefit will be sent to your Calculus account for you to e-sign and digitally submit. If you have any trouble accessing your Calculus account, you should contact ForeignNationalTax@rice.edu for assistance. Any questions about obtaining an SSN or ITIN should be directed to the Office of International Students and Scholars at oiss@rice.edu.
Fellowship Tax Withholding
- Payments applied directly to a student account do not have taxes withheld.
- Employment payments made through Payroll are taxed according to the W-4 completed by the student unless treaty benefits are available and claimed
- Fellowship payments made through Payroll will have 14% tax withheld for students in the U.S. on an F, J, M, or Q visa or 30% tax withheld for others unless a treaty benefit is available and claimed.
Fellowship Tax Reporting
- Fellowship payments that have 14% or 30% tax deductions, or are received tax-free due to tax treaty benefits, will be reported on IRS Form 1042-S.
- If you have received fellowship pays with multiple tax rates (for example, if you were to claim tax exemption treaty benefits after receiving prior taxed payments), you will receive separate 1042-S forms, separated by the applied tax withholding rate.
- Your 1042-S form will be received in the following tax year, no later than March 15th. If you have previously logged in to your Sprintax Calculus account and submitted your consent to receive your 1042-S form electronically, a digital copy of the form will be sent to your Calculus account.
- If you have not submitted the electronic 1042-S consent, a paper copy of your 1042-S will be mailed to the mailing address on file in your Sprintax Calculus account. If you have not set a mailing address in Calculus, your designated mailing address from iO will be used.
Questions?
Contact ForeignNationalTax@rice.edu