Carnegie Mellon University

Taxation of Graduate Student Awards

Policy Title Taxation of Graduate Student Awards at Carnegie Mellon University

Policy Owner

Office of the Vice President for Finance and Chief Financial Officer

Responsible Office

Office of the Vice President for Finance and Chief Financial Officer

Contact Information

Questions about this Policy should be directed to the Controller's Office at 412-268-9939.

Pertinent Dates

This Policy was approved on April 21, 2020.
Approved By This Policy was approved by the University Leadership Council
Entities Affected by This Policy All academic or administrative departments, divisions or other business units of the university providing awards to graduate students.
Who Needs to Know About This Policy All academic or administrative departments, divisions or other business units of the university providing awards to graduate students, and graduate students receiving awards from the university.
Relevant Documents

IRS Publication 970, "Tax Benefits for Education"
IRS Publication 901, "U.S. Tax Treaties"
IRS Publication 519, "U.S. Tax Guide for Aliens"

Reason for Policy/Purpose To identify for the campus community the taxation and withholding of U.S. Federal, state and local personal income/wage taxes for graduate student awards given by the university.
Abstract This Policy explains the taxation and withholding of U.S. federal, state and local income/wage taxes for graduate student awards given by the university.

I. Policy Statement

Graduate student awards given by the university may be subject to U.S. federal, state and local income (wage) taxes and required withholdings. This Policy explains the U.S. federal, state and local income (wage) taxation and withholding for graduate student awards given by the university.

II. U.S. Federal Personal Income Tax (and Tax Status)

a. U.S. Citizens and Permanent Residents

To fulfill its legal obligations, the university treats graduate student awards by the university in the form of scholarships, fellowships, teaching assistantships, research assistantships and stipends as being subject to U.S. federal personal income tax as follows:

  • If a graduate student is not a degree candidate, all award funds are subject to tax.
  • If a graduate student is a degree candidate, the amount of any award used for tuition, required university fees and required books, supplies and equipment is not subject to tax. The amount used for other expenses such as room, board and personal travel is subject to tax.
  • If a graduate student incurs business and/or travel expenses on the university’s behalf and submits the expense reimbursement in compliance with the university’s Business and Travel Expense (BTE) Policy, these expenses are not subject to tax.
  • The part of any award that represents payment for the graduate student's services, such as teaching, research or other service (e.g., writing, administrative assistance, etc.) is subject to tax.

In computing graduate student taxable income for purposes of required tax withholdings and any required informational returns, the university can determine centrally the part of a graduate student's award that covers tuition and required university fees, since the university publishes these costs. If departments submit to the HR Service Center a monthly award amount in addition to tuition and required fees, the entire additional amount is subject to tax. It is the graduate students’ responsibility to determine the portion of their award used for any additional required fees and expenses (e.g., books, supplies and equipment).

The university excludes the amount of the graduate student's award used for tuition and required university fees from the amount of taxable income shown on the graduate student’s IRS Form W-2.

Graduate students who have questions about the U.S. federal personal income tax consequences of their graduate student awards should consult their own personal tax advisor or refer to Internal Revenue Service (IRS) Publication 970, "Tax Benefits for Education." Non-resident alien graduate students may also wish to review the “Students and Apprentices” section of IRS Publication 901, "U.S. Tax Treaties." These IRS publications, and more information about U.S. federal income taxes, may be found at www.irs.gov.

b. Foreign Students and Permanent Residents

For U.S. federal income tax purposes, U.S. citizens and permanent residents are considered residents, but foreign graduate students may be considered residents or non-residents for tax purposes. Information on tax residency status may be found in IRS Publication 519, “U.S. Tax Guide for Aliens.” Some foreign graduate students may benefit from specific tax treaties between the U.S. and their home countries. Information on tax treaties is contained in IRS Publication 901, “U.S. Tax Treaties.” These IRS publications, and more information on U.S. federal income taxes, may be found at www.irs.gov.

III. Pennsylvania Personal Income Tax

The following applies only for those graduate students providing services within Pennsylvania. Therefore, if the graduate student is providing services at a university location in another state as part of the degree requirements that state’s income tax may be withheld from fellowship or stipend payments.

For purposes of Pennsylvania personal income tax and required withholdings, to fulfill its legal obligations, the university treats fellowship awards and stipends as taxable compensation for services if the recipient is required to apply his skill and training to advance research, creative work, or some other project or activity, unless the recipient is a candidate for a degree and the same activities are required of all candidates for that degree as a condition to receiving the degree. Thus, as long as the services rendered by a graduate student are a standard part of the degree requirements for all students in the student’s program, the university will not withhold Pennsylvania personal income tax from the student’s award/stipend. At the university, when graduate students are required to render services, those services are generally required to be rendered as a standard part of the degree requirements for the relevant degree program; as long as departments confirm that the services are required to be rendered as a standard part of the degree program, the university will not withhold Pennsylvania personal income tax from fellowship awards or stipends for students performing those services.

Further information about Pennsylvania personal income taxes may be obtained by visiting the Pennsylvania Department of Revenue website.

IV. City of Pittsburgh/Pittsburgh Public School District Earned Income Tax (Wage Tax)

The following applies only for those graduate students providing services within Pennsylvania. Therefore, if the graduate student is providing services at a university location in another state as part of the degree requirements that state’s income tax may be withheld from fellowship or stipend payments.

To fulfill its legal obligations, the university treats compensation that is subject to the Pennsylvania personal income tax (and required Pennsylvania personal income tax withholdings) as compensation that is subject to the City of Pittsburgh and Pittsburgh Public School District’s local earned income (wage) tax (EIT). Therefore, if an award is not considered by the university to be compensation for purposes of the Pennsylvania personal income tax, it is not considered compensation for the EIT. As a result, the university does not withhold EIT from graduate students for fellowship awards and stipends that are not subject to Pennsylvania personal income tax withholding.

Further information about the City of Pittsburgh and Pittsburgh Public School District EIT may be obtained by visiting the City of Pittsburgh's Department of Finance website.

V. Assistance in Responding to Correspondence from Taxing Bodies

Should a graduate student receive correspondence from the Pennsylvania Department of Revenue and/or the City of Pittsburgh (on behalf of itself and the Pittsburgh Public School District) erroneously seeking to tax some or all of a fellowship award or stipend that was paid to the student for services rendered in Pennsylvania, and required to be rendered as a standard part of the degree requirements for the student’s degree program, the graduate student's department should contact the HR Service Center to obtain a letter to complete on behalf of the graduate student citing the relevant Pennsylvania or EIT, as applicable, exclusion from tax.

If requested, the HR Service Center will provide the tax year and income paid to the department, and the remaining information will be completed by the department before providing it to the graduate student. The letter should be sent by the graduate student to the Pennsylvania Department of Revenue and/or the City of Pittsburgh, as the case may be.