Is this fellowship amount taxable?

[ik]

My son graduated 4 years University last June. Through his University he was selected to receive the public service fellowship that provides opportunities for graduating seniors to invest their talent, energy and training in public service. Fellows work full-time for ten months with a government or nonprofit agency, they do not get paid, and this fellowship is the only money source to cover their living expenses. My son didn't receive 1099, however, he received the letter from his University that says:

"The amount paid to you as a fellowship during the calendar year 2018 was $XXX.In accordance with Internal Revenue Service (IRS) regulations, University does not report on IRS Form 1099 Misc the amounts paid as fellowship to United States citizens and resident aliens. Nonetheless, the income you receive, together with any non-cash benefits you have received in connection with your fellowship, will generally be subject to federal and state income tax. Registration fees and other non-cash benefits, which could include medical insurance and/or reimbursements, are not included in the amount reported above. The registration fee for post-docs is $125 per quarter and is considered reportable if the recipient was not an employee on Payroll."

It's not clear to him of whether he should report this money on his 2018 return as income. If he does, can he write off any expenses, like travel (he moved from CA to DC for this ten months job), housing, transportation, meals etc. Appreciate your advice!

Thank you!

[PhyllisG · Accepted solution]

Fellowships are considered reportable and taxable events if the amount received was for:

• Non-degree candidates, such as post docs
• Either past, present, or future services by the recipient
• Room, board, travel, clerical help, equipment, incidental living expenses and other expenses not required for enrollment in or attendance at a University.

Because your son is considered a non-employee according to the letter, he can deduct any business related moving expenses including meals and transportation. In other words, he must be considered as self-employed and file a Form 1040 Schedule C. Otherwise, only qualified education expenses (e.g., books, tuition, school supplies) can be subtracted from his fellowship.