Tax Information

(Note: This section is completely unofficial and is no way endorsed by the Graduate Program or University of California.)

How do I pay taxes for my first year?

Your first year, you will probably be paid through some sort of fellowship and training grant (see below). Also, don’t forget to pay taxes if you made money in another state and then moved to CA!

How do I pay taxes on while on fellowship?

If you’re paid through some sort of fellowship or training grant (generally the case during your first year!), this usually means that taxes won’t be taken out (“withheld”) from your monthly paycheck. Unfortunately, the burden of saving for the taxes that should’ve been withheld is placed on you, and you potentially must pay quarterly estimated taxes (see next section). Depending on any other income sources or financial accounts you may have, your individual tax burden may be slightly different.  However, an informal poll of BioE graduate students showed that they paid around $4000-$6000 in total taxes (both California and Federal income taxes) for the 2016 tax year.


What are quarterly estimated taxes?

According to the IRS: “The United States income tax system is a pay-as-you-go tax system, which means that you must pay income tax as you earn or receive your income during the year. You can do this either through withholding or by making estimated tax payments. If you didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax.”

Quarterly means paying on the dates as follows (as of 2017, the due dates are on the BEAST calendar):

For the period: Due date:
Jan. 11 – March 31 April 18
April 1 – May 31 June 15
June 1 – Aug. 31 Sept. 15
Sept. 1 – Dec. 31 Jan. 16, next year2

The total amount you must pay is the smaller of:

  1. 90% of your total expected tax for 2017, or
  2. 100% of the total tax shown on your 2016 return. Your 2016 tax return must cover all 12 months.”

Many people come in their first year from undergraduate studies and did not earn money the previous year, in which case you do not need to pay quarterly estimated taxes your first year. However, in future years on fellowship or if you were earning money before grad school, you will incur a penalty (~$100 for federal + CA) if you don’t pay estimated taxes quarterly.

The forms you need to figure out and pay those taxes are 1040-ES (federal) and 540-ES (state).  You’ll need your 1098-T form to understand how much taxable scholarship you have (see next section).

How do I interpret my 1098-T form?

Unlike those folks paid through an HR (Human Resources) department, you will not receive a “W2″ form; you will receive a 1098-T (Tuition) form(s). To interpret that form:

Box 5 (scholarships or grants) – Box 1 (Payments received for qualified tuition and related expenses) = your taxable stipend + taxable money paid for health insurance + taxable money paid for UCB bus pass

Note that because of the money paid for health insurance/bus pass, even if you are not on fellowship, there will be some amount in Box 5 > Box 1.

See the example below for a UCB-based student from the 2014 tax year, where his total taxable income for the 2014 year (reported as “other income”) was $500.

Institution Cost (1098T) Scholarships (1098T) Taxable Income (Scholarships – Cost)
UCB $27879.50 $49482.50 $21603.00
LBNL $0 $13542.75 $13542.75
Total $27879.50 $63025.25 $35145.75

Overall, his tax burden was about $4000 (to both the federal government and CA state).

How do I input the taxable portion of the scholarship into my tax forms?

“If you file Form 1040, include the taxable amount in the total on line 7. If the taxable amount was not reported on Form W-2, also enter “SCH” and the taxable amount on the dotted line next to line 7.” (Source)


What should I do if I am paid through an HR department or appointment?

If you are one of the lucky folks who is paid through an HR department or an appointment, you will probably be able to have taxes taken out of your monthly income. Check with your HR department to see if this is possible. If this is the case, then FANTASTIC (you don’t typically have to worry about owing money come tax season). If you are paid through an HR department or appointment, you will receive a W2 income earnings statement; you will report your income in the appropriate box on the tax form (instead of “other income” for first year students or fellowship holders).

I am still ridiculously confused. Who can I talk to?

Unfortunately, the university is not “allowed” to give out *any* tax advice. They do give out some information at various workshops around tax season; some 2018 slides are here. I strongly suggest you chat with other graduate students about this if you are not sure! While our advice isn’t official, it can definitely help.