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Taxation of Fellowships Paid to Foreign Visitors

Learn about withholding/ collection and reporting of federal tax on fellowship payments to foreign visitors.

"A fellowship grant is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research" according to the Internal Revernue Service (IRS), which is the U.S. federal tax authority. Tax law does not use the word stipend. Residency status for federal tax purposes determines how fellowship payments to foreign visitors are taxed and reported. Some countries have tax treaties with the U.S. that exempt their citizens from federal tax on fellowship income, though the income is reportable on nonresident tax returns.

Nonresident aliens on F or J immigration statuses are subject to 14% federal tax withholding/collection on payments from UC San Diego that are classified as fellowship unless they have claimed exemption under a tax treaty. The tax rate is 30% for those under other immigration statuses. These payments and any tax withheld or collected will be reported on or before March 15 of the following year on Form 1042-S.

Fellowships are generally taxable in the state of California, though no tax withholding is required. Individuals may need to make quarterly tax payments to the California Franchise Tax Board (FTB) (state tax authority).

The most common fellowship payments at UC San Diego:

Payroll Title Title Code Description Taxation Tax Reporting forms from UCSD
Research Fellow Without Salary 3296 Graduate Student Fellowship paid to nonresident aliens 14% federal tax withholding if F or J status. 30% if other status.* Form 1042-S
Postdoc Fellow 3253 FEL Postdoctoral Fellowship paid to nonresident aliens 14% federal tax withholding if F or J status. 30% if other status.* Form 1042-S
Postdoc Fellow 3253 FEN Postdoctoral Fellowship paid to resident aliens, citizens, permanent residents No tax withholding No reporting
Benefits for Postdoc Fellows & Postdoc Paid-Directs (TC 3253 & 3254) 3254, 3253

UCSD's cost of benefits (medical insurance, etc.) provided to nonresident aliens who do not have a concurrent ≥50% employee appointment are imputed as fellowship income. 

14% federal tax withholding/collection if F or J status. 30% if other status.*

Form 1042-S

* Claiming a tax treaty may grant exemption from federal tax withholding on fellowship payments. The tax-exempt fellowship income paid to nonresident aliens will be reported on Form 1042-S.

Federal tax is withheld before direct payment is made under title codes 3296 & 3253 FEL. For those receiving benefits that are imputed as fellowship income, federal tax will be withheld from wage income or collected via invoice.

US citizens, permanent residents, and residents for tax purposes will not have federal tax withheld or collected, and no official reporting form will be issued by UCSD. They are expected to report taxable fellowship income, including the imputed benefits income, on their annual tax returns. 

Fellowships not listed above are paid through the UC San Diego Disbursements Division