How should I report graduate fellowship income such that it counts as earned income for the purpose of Roth IRA contributions?

[zml941116]

@AbrahamT @Hal_Al Hi HaI, box_9 was already checked, please see the following. Any other things I should check? Thanks

[AbrahamT]

Here's what you do

Put the scholarship amount in this section

NOT in this section

then, when you enter the IRA contributions, watch what you do

when you get to this screen, make sure you indicate that all the scholarship money was used for gradute studies like this

When this is done, you will see that the deductions will be offsetted by the scholarships, like this

[zml941116]

hi @AbrahamT, thanks a lot. I just realized that I have to edit the IRA contribution one more time so that it can update correspondingly. BTW, according to my institution, my fellowship is considered an award, not pay for service, therefore, it's tax-free. Is it going to change anything? Or is there anything I should pay attention to when filing on turbotax? thanks so much

[AbrahamT]

Your IRA contribution is going to wipe out that income bringing your adjusted gross income to 0 anyway, so you got nothing to worry about. 

[Hal_Al]

 Q. According to my institution, my fellowship is considered an award, not pay for service, therefore, it's tax-free. Is it going to change anything? 

A. Yes. If that income is not taxable, it's also not compensation. That "income" does not qualify you to make an IRA contribution. 

[melsawy]

Hi. My wife has a similar situation with a fellowship. The fellowship is awarded by the university, it pays for the tuition + stipend. Shes in MA (MIT to be specific). Since shes a green card holder she does not get a 1042-S (for the stipends she gets paid) or a 1098-T (for tuition paid by fellowship automatically). Can you please confirm my understanding:

• The portion of the fellowship paid towards tuition is not taxable but the portion that goes into her bank account (as a stipend) is taxable.
• Now since she does not get a 1098-T and the fellowship portion that pays for her tuition is not taxable, she is not eligible for American Learning Opportunity Credit?

I am also struggling to get her stipend from the fellowship portion to show on the 1040. Ive seen the steps listed here but none of them appear for me. I am in the Deductions & Credits section, I press Expenses and Scholarships (1098-T), Add a student.

1. Select she was working on Associate, Bachelors or Graduate Degree
2. Select Full-time status for 2022
3. Did you get a 1098-T for year 2022? I select No.
4. Next question is checking whether I qualify for an exception. Does she qualify? If I select no, then thats it, It does not allow me to add any other information. If I press yes it tells me to enter the info from the 1098-T which I dont have?

Thanks for your help in advance.

[DMarkM1]

Yes, you are correct.  Generally, anything received above and beyond education expenses is taxable and since everything was covered and she did not get a form 1098T, she would not be eligible for the American Opportunity Credit.   

You are on the right track in the Education topic.  When asked to enter the 1098T information enter the school name and address and do not enter a FED ID number.  You will then be advised that it is missing.  You should then select "I could not find the number."  This will open up the interview section to enter the costs and the payments received.  Be advised the fellowship stipend can typically be used for room and board.  I imagine your spouse contributed to room and board payments.   

[Hal_Al]

 Q. Can you please confirm my understanding: The portion of the fellowship paid towards tuition is not taxable but the portion that goes into her bank account (as a stipend) is taxable.

A. Yes.

Q. Can you please confirm my understanding: Now since she does not get a 1098-T and the fellowship portion that pays for her tuition is not taxable, she is not eligible for American Learning Opportunity Credit?

A. Yes.

Q. I am also struggling to get her stipend from the fellowship portion to show on the 1040. Next question is checking whether I qualify for an exception. Does she qualify?

A. Probably. But answer yes even if she doesn't.  Lying to TurboTax to get it to do what you want does not constitute lying to the IRS. You're only doing that to get TurboTax tp present the screens you need to enter your info.  You're not trying to claim something (a credit) you're not allowed.