117(d): Please don’t tax PhD tuition waivers

This is a rare politics post; I’ll try to keep this short and emotion-free. If parts of this are wrong, please correct me. More verbose explanations here, here, here, here, longer discussion here.

Suppose you are a math PhD student at MIT. Officially, this “costs” $50K a year in tuition. Fortunately this number is meaningless, because math PhD students serve time as teaching assistants in exchange for having the nominal sticker price waived. MIT then provides a stipend of about $25K a year for these PhD student’s living expenses. This stipend is taxable, but it’s small and you’d pay only $1K-$2K in federal taxes (about 6%).

The new GOP tax proposal strikes 26 U.S. Code 117(d) which would cause the $50K tuition waiver to also become taxable income: the PhD student would pay taxes on an “income” of $75K, at tax brackets of 12% and 25%. If I haven’t messed up the calculation, for our single PhD student this means paying $10K in federal taxes out of the same $25K stipend (about 40%).

I think a 40% tax rate for a PhD student is a bit unreasonable; the remaining $15K a year is not too far from the poverty line.

(The relevant sentence is page 96, line 20 of the GOP tax bill.)

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5 thoughts on “117(d): Please don’t tax PhD tuition waivers

  1. Slightly off topic, but Evan could you create a feature that lets me delete other things I have posted in comments on your blog (under other names and another email address besides the one I am using right now) if I am able to correctly identify the email address which was used to post them (as evidence it was me)?

    There’s some stuff I’ve posted elsewhere on this blog that I really don’t think should be anywhere on the internet, let alone here and as a result of me (I don’t really feel like saying what I’m talking about).

    Like

  2. Not sure, if it’s still relevant, but can’t the schools just remove that “waived” tuition altogether? Yes, it may be a bureaucratic nuisance to do it, but if they care for their grad students, they should just do it, no?

    Liked by 1 person

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