Stipend

[alansaff]

I am a dual UK & USA citizen living in England. I am a PHD student receiving a UK government stipend (or living allowance) while undertaking full time research in a university lab. Under UK tax rules, the stipend is exempt from UK tax. What is the USA tax treatment under the US/UK treaty please?

[AHelper]

Hello Alansaff,

Being a dual citizen is a wonderful option, but can make taxes that much more confusing at times. It can also depend on the specific program and how it is paid out. In many cases, your school will have guidance about the stipends themselves.

If your stipend is education related, then you will need to determine if your stipend is taxable.

Non-Taxable Fellowship - A fellowship payment received by a candidate for a degree, also called a “scholarship” payment by the IRS, is not taxable income to the student if it is used only for tuition and required fees and/or course related expenses, such as fees, books, supplies and equipment that are required of all students enrolled in courses. These payments are not taxable income to the student.

Taxable Fellowship – A payment, typically known as a "stipend", used for living and incidental expenses such as room and board, travel, equipment, i.e. computer or other expenses that are not required of all students enrolled in courses. These payments are taxable income to the student.

How To Report

1. Select Federal Taxes (Personal in the Home & Business edition).
   In Online TurboTax, click the bars at the upper left corner to show Federal Taxes on the selection list; enlarge the screen if needed to show the left side selection list.
2. Select Deductions & Credits, and in the new screen, click on I'll choose what I work on.
3. Scroll down the Education screen .
4. Click on the Start/Update button next to the Expenses and Scholarships (Form 1098-T) category.
5. Click Update
6. Follow the prompts (there will several questions to complete before arriving at the section to report your fellowship)
7. When you arrive at the section "Did You Receive a Scholarship or Grant in 2021?"
8. Select Yes and follow the prompts

Please review IRS publication 970, Tax Benefits for Education for additional information - www.irs.gov/pub/irs-pdf/p970.pdf

There is a similar situation US citizen doing a full-time PhD program abroad while working part-time in the UK 

After you determine if it is taxable this is another source of how to enter it. How to Report Graduate Student Stipend in TurboTax 

Good luck on exams and have a great day.

[alansaff]

Thanks for your reply. 

Part of my stipend is to cover room and board etc so is taxable. Under the US,/UK tax treaty, can I claim a federal income tax earned income exclusion for such taxable income please?

[AHelper]

Yes you can report it as foreign earned income for the exclusion if it meets the guidelines here, however if you do you will not be eligible for any Lifetime Learning or other education credits.