Fellowship Office
209 Coble Hall, gradfellowships@uiuc.edu, (217) 333-0036
Tax and Loan Information for U.S. Students with 2007-2008 Fellowships
Taxes
Fellowship stipends may be subject to income taxes. According to the Internal Revenue Service (IRS), universities are not responsible for withholding or reporting income taxes on fellowship payments for U.S. citizens, permanent residents and foreign national resident aliens for tax purposes. Taxability of the fellowship payment is a matter between the Fellow and the IRS. Therefore, no income taxes are withheld from fellowship payments. Fellows do not receive a Form W-2 on their fellowship income nor does the University report the fellowship payment as taxable income to either the state or federal government.
Nevertheless, it is important to remember that the fellowship may be subject to income tax. The IRS requires a taxpayer owing at least $1,000 in taxes in a given calendar year after subtracting withholdings and credits to file estimated quarterly tax returns. Additional information about estimated tax payments can be found in Form 10-40-ES (PDF). Penalties may be assessed for incorrect filing and underpayment of taxes. When students file their income tax returns, they should remember that a portion of the fellowship might be tax-exempt. Students are advised to keep receipts in case they are audited at some point in the future. The tuition waiver that comes with the fellowship may be tax-exempt.
More information on taxation of fellowships can be found in IRS Publication 970: Tax Benefits for Education (PDF), or by calling 1-800-829-3676.
Loans
Because a fellowship is considered financial aid, the fellowship payment may reduce a student's assessed need for a loan. Traineeship payments do not affect a student's assessed need for a loan.
Assistantships
All students with assistantships in addition to their fellowships will receive a Form W-2 on the assistantship income. Students with assistantships may elect to have additional income taxes withheld from the assistantship income.
Fellowship Office Home | Tax Information
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