Do You Get Paid During a Fellowship? Stipends, Taxes, and FICA

Fellowship stipends and taxes work differently from a regular paycheck in two ways that matter: the money is a fixed award rather than a wage, and most institutions send it to you without withholding a cent for the IRS. Pay ranges from about $14,628 a year for undergraduate research appointments to $75,564 for senior postdoctoral fellows on NIH awards, with NSF graduate fellows sitting at $37,000. The portion you spend on tuition and required course materials can be excluded from your taxable income if you are a degree candidate. Everything else, including the money that covers your rent and groceries, is taxable, and you are the one responsible for paying that tax throughout the year.

Typical Stipend Amounts

Career stage is the biggest factor. The NIH National Research Service Award scale sets benchmark numbers that many institutions follow even outside the NIH system:

Beyond career stage, location and field push the number around. Programs in high-cost cities generally pay more than the same appointment in a cheaper metro. STEM stipends tend to run higher than humanities awards. International programs like Fulbright set stipends against the cost of living in the host country rather than a single fixed figure.

What Portion of Your Stipend Is Tax-Free

Under Internal Revenue Code Section 117, fellowship money spent on tuition, enrollment fees, and required books, supplies, or equipment is excluded from your gross income, but only if you are a candidate for a degree at an eligible educational institution.4Office of the Law Revision Counsel. 26 USC 117 – Qualified Scholarships Everything else you spend the money on, including rent, food, utilities, health insurance, and travel, counts as taxable income.5Internal Revenue Service. Topic No. 421, Scholarships, Fellowship Grants, and Other Grants

Two conditions in that rule catch fellows off guard. First, the exclusion applies only to degree-seeking students. If you hold a postdoctoral fellowship and already have your terminal degree, none of your stipend qualifies for the Section 117 exclusion, and the full amount is taxable. Second, even degree-seeking students lose the exclusion on any portion of the fellowship that pays for required teaching, research, or other services.4Office of the Law Revision Counsel. 26 USC 117 – Qualified Scholarships If your award letter conditions the fellowship on serving as a teaching assistant or conducting specific research, that portion is taxable regardless of how you spend it.

Narrow exceptions to the service requirement exist for participants in the National Health Service Corps Scholarship Program, the Armed Forces Health Professions Scholarship Program, and comprehensive student work-learning-service programs at designated work colleges.4Office of the Law Revision Counsel. 26 USC 117 – Qualified Scholarships Outside those programs, the rule is strict.

Health insurance premiums paid or subsidized by your fellowship are not qualified education expenses, so that benefit adds to your taxable income.6Internal Revenue Service. Publication 970 Tax Benefits for Education If your institution pays $5,000 toward your health plan, you owe tax on that $5,000 even though you never see the cash.

Paying Taxes When Nothing Is Withheld

Most institutions do not withhold federal or state income tax from fellowship stipend payments made to U.S. citizens and resident aliens.7Internal Revenue Service. Withholding Federal Income Tax on Scholarships, Fellowships and Grants Paid to Nonresident Aliens You are responsible for paying the IRS yourself throughout the year using Form 1040-ES, which sets up quarterly estimated tax payments.

The IRS expects estimated payments if you will owe $1,000 or more after accounting for any withholding and refundable credits. You can avoid underpayment penalties by paying at least the smaller of 90 percent of your current-year tax or 100 percent of last year’s tax liability. If your adjusted gross income exceeded $150,000 in the prior year, that second threshold rises to 110 percent.8Internal Revenue Service. Estimated Tax For a first-year fellow with no prior tax history to lean on, paying 90 percent of what you estimate you will owe is the safer target.

At tax time, taxable fellowship income that was not reported on a W-2 goes on Schedule 1 (Form 1040), Line 8r, which is specifically designated for scholarship and fellowship grants.9Internal Revenue Service. 2025 Schedule 1 (Form 1040) You may also receive Form 1098-T from your institution, showing how much was applied to qualified tuition. That form helps you figure the split between excludable and taxable amounts, but if you never receive one, you are still responsible for reporting the taxable portion.10Internal Revenue Service. Form 1098-T 2025 Tuition Statement

Keep detailed records of every dollar your fellowship pays and how you spend it. The line between “required for enrollment” and “helpful for your research but not required” matters for determining what is excludable, and you will want receipts if the IRS asks.

FICA, Self-Employment Tax, and the Social Security Gap

Fellowship stipends that are not compensation for services generally do not trigger Social Security or Medicare (FICA) taxes. That is a real short-term savings, but it comes with a trade-off: you do not earn Social Security credits during those years either. For a fellow spending four to six years on a stipend, that gap in your earnings record can affect future retirement benefits.

If your fellowship requires you to provide services such as teaching or lab work, and you are enrolled as a student at the institution where you perform those services, the student FICA exception under IRC Section 3121(b)(10) may still exempt you from FICA withholding. To qualify, your work must be secondary to your coursework, you must be enrolled and regularly attending classes, and you cannot be classified as a professional employee of the institution.11Internal Revenue Service. Student FICA Exception The IRS defines “professional employee” broadly: if you are eligible for vacation time, sick leave, or a retirement plan through the school, you likely do not qualify.

Pure fellowship stipends are also not subject to self-employment tax, because they are not income from a trade or business. In this respect fellowship income is treated more favorably than freelance or contract pay.

Using Fellowship Income for Retirement Savings

Fellows used to face a Catch-22: their stipend income was taxable, but it did not count as compensation for IRA contribution purposes, which shut them out of tax-advantaged retirement accounts. The SECURE Act changed that starting in 2020. Taxable fellowship and stipend payments now count as compensation for contributing to a traditional or Roth IRA, as long as the amounts are included in your gross income.

For 2026, you can contribute up to $7,500 per year to an IRA, or $8,600 if you are 50 or older, capped at the amount of your taxable compensation for the year.12Internal Revenue Service. Retirement Topics – IRA Contribution Limits If your taxable fellowship income is $28,000, you can contribute up to $7,500. If it is only $5,000, your limit is $5,000. Opening a Roth IRA during a fellowship, when your income and tax rate are relatively low, is often an especially strong move.

Fellowship income does not qualify you for the Earned Income Tax Credit, because the EITC requires earned income from employment or self-employment, and a pure fellowship stipend is neither. The same logic applies to employer-sponsored retirement plans like a 401(k): without an employment relationship, there is no plan to contribute to.

Extra Rules for International Fellows

Nonresident aliens who receive fellowship payments in the United States face a different set of rules. The default federal withholding rate on taxable fellowship income paid to a nonresident alien is 30 percent, though it drops to 14 percent for students and researchers on F, J, M, or Q visas when the taxable amount is connected to a qualified scholarship.7Internal Revenue Service. Withholding Federal Income Tax on Scholarships, Fellowships and Grants Paid to Nonresident Aliens Many countries have tax treaties with the United States that reduce or eliminate this withholding.

If a treaty applies, file Form 8233 with the paying institution to claim the exemption before payments begin.13Internal Revenue Service. About Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual At year end, the institution reports your fellowship income on Form 1042-S using income code 16 rather than a W-2 or 1099.14Internal Revenue Service. Instructions for Form 1042-S (2026) International fellows typically file Form 1040-NR rather than the standard 1040, and estimated tax obligations still apply to any amount not covered by withholding.

Fellow or Employee When the Classification Is Wrong

Whether you are classified as a fellow or an employee affects your taxes, your benefits, and your legal protections. A true fellow receives a stipend to support independent study or research. An employee receives wages for services performed under the direction of an employer. Many fellowship arrangements blur that line, especially when institutions require fellows to teach classes or staff research labs on a set schedule.

If your arrangement looks more like employment than independent study, the institution should be treating your payments as wages, withholding income and FICA taxes, and giving you a W-2. When institutions misclassify employees as fellows, the fellow loses access to unemployment insurance, workers’ compensation, and employer FICA contributions, while also taking on the burden of estimated tax payments they should not have to make. If you have a fixed schedule, a supervisor directing your daily work, and no meaningful control over what you research, it is worth asking whether your classification is correct.