Are Fellowship Stipends Taxable? Reporting, Estimated Tax, and Credits

Yes, fellowship stipends are taxable, but only in part for most graduate students. If you’re a degree candidate, the money you spend on tuition, required enrollment fees, and books, supplies, or equipment required of every student in a course is tax-free. Everything else in the stipend — room and board, travel, optional equipment, and any payment tied to services you perform — counts as taxable income. If you’re not pursuing a degree, the whole stipend is taxable.¹

The Tax-Free Portion

Section 117 of the Internal Revenue Code lets you exclude fellowship money from gross income when two things are true: you’re a candidate for a degree at an eligible institution, and the money pays for qualified education expenses. A “candidate for a degree” means you’re enrolled at a primary, secondary, undergraduate, or graduate program at a school with a regular faculty, a set curriculum, and a regularly enrolled student body.¹

Qualified expenses are narrow. They cover tuition, fees required for enrollment, and books, supplies, or equipment that every student in a particular course must have.¹ A lab kit your professor requires of the entire class qualifies. A laptop you chose to buy because it makes your work easier does not, even if you use it for coursework every day. Keep receipts and course syllabi; they’re your proof that a purchase was required rather than optional.

The Taxable Portion

Any fellowship dollars that don’t land in that narrow qualified-expense category are taxable. Universities often pay a single lump-sum stipend that covers many things at once, which makes the money feel uniform. It isn’t.²

Room and board are taxable, even when the university requires on-campus housing as a condition of the fellowship.
Travel is taxable, including airfare for research trips, conference travel, and commuting.
Optional equipment, such as a personal computer or software you weren’t required to buy, is taxable.

Payments for Teaching or Research

If any part of your fellowship requires you to teach, conduct research, or perform other services, the IRS treats that portion as compensation rather than a grant. That’s true even if the university calls the whole package a fellowship and even if the work is central to your degree. A narrow exception applies to services required by the National Health Service Corps Scholarship Program, the Armed Forces Health Professions Scholarship Program, or a comprehensive student work-learning-service program at a work college.²

Mandatory Health Insurance

Many graduate programs require students to carry health insurance and bill the premium as a fee. Whether that fee counts as a tax-free “fee required for enrollment” under Section 117 isn’t settled. The IRS hasn’t issued specific guidance on mandatory student health insurance premiums as qualified education expenses. Some practitioners treat the fee as qualified when it appears on the tuition bill and enrollment depends on paying it; others take a more conservative view. If the dollar amount is meaningful, talk to a tax advisor who works with graduate students.

Postdocs and Other Non-Degree Recipients

The Section 117 exclusion is only available to degree candidates.¹ If you’ve already earned your degree and hold a postdoctoral fellowship, none of your stipend qualifies for exclusion. The same rule reaches visiting scholars, research associates on fellowship appointments, and anyone else receiving a stipend outside of a degree program. A postdoc receiving $55,000 in fellowship income could easily owe $8,000 or more in federal income tax with nothing withheld during the year.

How to Calculate What You Owe

The math is subtraction. Start with your total fellowship amount for the year, pulled from your award letter or university financial portal, and pair it with Form 1098-T, which shows tuition and related amounts billed or paid.³ Add receipts for any required books, supplies, or equipment not already reflected on the 1098-T. Subtract those qualified expenses from the stipend. What’s left is your taxable fellowship income. Add in any separate payment you received for teaching or research services.

An example: a $30,000 stipend against $20,000 in qualified tuition and fees leaves $10,000 of taxable fellowship income. For 2026, the standard deduction for a single filer is $16,100, so a recipient with $10,000 of taxable fellowship income and no other income would owe no federal tax.⁴

Reporting on Your Return

How you report the income depends on how your institution classified it. If a taxable portion of your fellowship shows up in Box 1 of a W-2, which is common for teaching or research assistantships, put it on Form 1040, line 1a with your other wages. If the fellowship wasn’t reported on a W-2 — the more common situation for pure stipends — report it on Schedule 1, line 8r, labeled “Scholarship and fellowship grants not reported on Form W-2.” That figure flows to Form 1040 or 1040-SR, line 8.⁵ In tax software, look for a field labeled “taxable scholarship income” or “fellowship grants” so the amount routes to the right line.

Estimated Tax Payments

Universities generally don’t withhold federal income tax from fellowship stipends paid to U.S. citizens and resident aliens. If you’re used to a paycheck with taxes taken out, the stipend can feel like clean money until you file. You’re required to make quarterly estimated tax payments if you expect to owe $1,000 or more in federal tax for the year after withholding and refundable credits.⁶

For 2026, the due dates are April 15 (for income received January through March), June 15 (April through May), September 15 (June through August), and January 15, 2027 (September through December). You avoid an underpayment penalty by paying at least 90% of your 2026 tax liability through estimated payments, or 100% of your 2025 tax, whichever is less. If your 2025 adjusted gross income exceeded $150,000, the second threshold rises to 110% of the prior year’s tax. If you had zero tax liability for the full 2025 tax year, you don’t need to make estimated payments for 2026. Form 1040-ES is where you calculate and submit them.⁶

Social Security and Medicare Tax

A pure fellowship stipend that doesn’t require any services in return is generally not subject to FICA or self-employment tax. Those payments aren’t wages and aren’t earned from a trade or business, so the taxable portion faces income tax without the added 15.3% self-employment hit.

Service payments are different. If you work as a teaching or research assistant at your university, that pay is normally subject to FICA. A student exception under IRC Section 3121(b)(10) exempts services performed by students enrolled and regularly attending classes at the school that employs them. You must be at least a half-time student and cannot be classified as a career employee at the institution.⁷ The exception generally doesn’t apply during summer breaks longer than five weeks.⁸

Coordinating With Education Tax Credits

Degree candidates have a real planning move here. The American Opportunity Tax Credit and the Lifetime Learning Credit both reduce your tax based on qualified education expenses you paid. Expenses covered by a tax-free fellowship can’t also support a credit — the same dollar can’t do both jobs.⁹

You can, however, choose to treat some of your fellowship as taxable by applying it to living expenses rather than tuition. That frees up tuition dollars to support a credit. Say you receive a $25,000 fellowship against $15,000 in tuition. You could exclude the full $15,000 and report $10,000 as taxable, or you could exclude only $11,000, report $14,000 as taxable, and use the remaining $4,000 in tuition toward the AOTC. The AOTC can be worth up to $2,500 a year, so in many cases voluntarily reporting a few thousand more dollars as income unlocks a larger credit and leaves you ahead. Whether it pays off depends on your bracket.⁹

International Students and Nonresident Aliens

The definition of qualified education expenses is the same for nonresident aliens as for U.S. citizens; Section 117 doesn’t depend on immigration status.¹⁰ What changes is the paperwork. Universities must withhold federal income tax on the taxable portion of a fellowship paid to a nonresident alien. The default rate is 30%, but it drops to 14% for students and scholars temporarily in the U.S. on an F, J, M, or Q visa.¹¹ The institution reports payments on Form 1042-S, and the recipient files Form 1040-NR.

Many countries have tax treaties with the U.S. that partially or fully exempt scholarship and fellowship income. Article 20 of the U.S.-China treaty, for example, lets Chinese students exempt qualifying scholarship income, and that exemption can continue after the student becomes a resident alien.¹² To claim a treaty benefit, give your institution Form W-8BEN along with your SSN or ITIN. Without a taxpayer identification number on file, the university can’t apply the reduced rate. Treaty articles often carry time limits, so check the terms for your country of residence.

1
Office of the Law Revision Counsel. 26 USC 117 – Qualified Scholarships
2
Internal Revenue Service. Topic No. 421, Scholarships, Fellowship Grants, and Other Grants
3
Internal Revenue Service. About Form 1098-T, Tuition Statement
4
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
5
Internal Revenue Service. Publication 970, Tax Benefits for Education
6
IRS. 2026 Form 1040-ES Estimated Tax for Individuals
7
Internal Revenue Service. Student FICA Exception
8
IRS.gov. Proposed Revenue Procedure Regarding Services That Qualify for the Student FICA Exception
9
Internal Revenue Service. The Interaction of Scholarships and Tax Credits
10
Internal Revenue Service. Publication 519, U.S. Tax Guide for Aliens
11
Internal Revenue Service. Federal Income Tax Withholding and Reporting on Other Kinds of U.S. Source Income Paid to Nonresident Aliens
12
Internal Revenue Service. Claiming Treaty Exemption for a Scholarship or Fellowship Grant