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.)
5 thoughts on “117(d): Please don’t tax PhD tuition waivers”
Does the senate version also strike 117(d)?
I don’t know, can’t seem to find the text for the Senate’s bill online (but perhaps am not looking in the right places).
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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).
I don’t think it’s possible software-wise, since this is a wordpress.com blog I don’t have permission to add arbitrary scripts. But if you contact me I can do such things manually.
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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?
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