2008 - U.S. Graduate and Professional School Students and Postdoctoral Fellows

Federal and State of CT Tax Treatment of Certain Payments Made by Yale University

(1)  Under federal tax law, a scholarship or fellowship provided to a student in a degree granting program is generally taxable.  If you are a candidate for a degree, however, you can exclude from taxable income that part of the award used to pay the costs of tuition, required fees, books, equipment and supplies (required fees, books, equipment and supplies are limited to those specifically required of all students in a course).  You cannot exclude from taxable income any part of the grant used for other purposes, such as room and board.  Please refer to IRS Publication 970, Tax Benefits for Higher Education, Section 1, Scholarship, Fellowships, Grants and Tuition Reductions and the IRS tax guide for students, Taxable Income for Students.

(2) Graduate School stipends are generally taxable to the recipient (see footnote (1), above).  The fact that the University is not required to report the stipend on a federal or state Form 1099 or W-2 does NOT relieve you from the obligation of reporting these amounts on your individual income tax returns and paying the tax liability on the taxable portion of the stipend.  The amount of the stipend is reported on your final pay stub for the calendar year.  This information can also be obtained from your business office.

(3) Federal Income Tax (FIT):  Federal income tax is withheld at a graduated rate based on your Form W-4 filed with the Payroll Office.  In addition to the Form W-4 instructions, the IRS provides a withholding calculator tool in order to assist you in determining the appropriate amount of federal income tax withholding.

Note:  Your current W-4 and CT W-4 statuses are included in the top right hand corner of your Statement of Earnings and Deductions (i.e., your weekly or semi-monthly paystub).  You can change the W-4 and CT W-4 withholding status prospectively by completing and submitting new forms to the Payroll Office.

(4) Social Security and Medicare (FICA) Tax :  FICA tax is withheld at a combined tax rate of 7.65% (6.2% social security and 1.45% Medicare) subject to certain thresholds.  Payments for services performed by an undergraduate, graduate or professional school student who is enrolled at the University at least half time during an academic term are generally exempt from FICA tax. 

(5)  Estimated Tax Payments:  You may be required to make federal and/or state quarterly estimated income tax payments.   Please refer to the federal quarterly estimated tax payments and State of Connecticut quarterly estimated tax payments sections of this site for the payment requirements.

(6)  Note:  Postdoctoral fellowships and postdoctoral fellow funded healthcare are not wages and, therefore, are not subject to FICA tax withholding.  Although these payments are generally taxable, they are not considered income from a trade or business and, thus, do not constitute net earnings from self employment.  Accordingly, these payments are not subject to the corresponding FICA tax imposed on self employment income.