How the GOP’s Tax Cuts and Jobs Act will affect graduate students

Princeton graduate students could see their tax bills skyrocket to $11,000 or more if the Republican tax bill currently under consideration in the House of Representatives becomes law.

The GOP bill eliminates §117(d) in the U.S. tax code, a provision which exempts “qualified tuition support” for research and teaching assistants from being counted towards gross income.

This means that a student whose funding comes in full or part from a teaching or research assistantship at Princeton will be paying tax not just on their stipend and any additional teaching/research income, but also on the roughly $49,000 Princeton tuition as “non-cash income.”

Fortunately, students who are on fellowships would not see their tuition support counted towards taxable income. §117(a), which exempts “qualified scholarships” from taxation would remain on the books. But most Princeton students receive at least part of their funding from assistantships during their the course of their PhD program and would therefore be affected by the tax bill.

What does this mean in practice?

Let’s take a single student on a 12-month Assistantship in Instruction. They earn a $31,100 stipend.

Here’s how the tax breaks down:

Gross income is $31,100. Take the standard deduction–in 2017, $6,350–for a gross taxable income of $24,750. The first $9,325 is subject to 10% tax–$932.50–with the remaining $15,425 subject to 15%- $2,313.75.

This means that the total tax bill–assuming no other deductions–of a Assistantship in Instruction for 2017 would be $3,246.25–an effective tax rate of 10.4%

How much would this student pay under the proposed tax bill?

Princeton tuition, plus the student health plan fee, is $48,940. Add that amount to the income the student earns through the stipend: $80,040. The new standard deduction under the proposed plan is $12,200, so subtract that from $80,040.

The student owes taxes on $67,840.

The new brackets tax income up to $45,000 at 12%, and income from $45,000 to $200,000 at 25%.

So, the student would owe $5,400 on the first $45,000 of “income,” and $5,710 on the subsequent $22,480 of income.

The total tax liability–assuming no other deductions–for this student would be $11,110–roughly 36% of actual income.

This would be a devastating tax increase, particularly when the university itself estimates living expenses for 12 months in Princeton to be $30,300.

What can you do? Right now, this is a proposed bill. It has not gone into law yet. CONTACT YOUR REPRESENTATIVES AND LET THEM KNOW THAT THIS BILL WILL DEVASTATE ALREADY-STRETCHED GRADUATE STUDENTS.

Bonnie Watson Coleman is the congresswoman who represents Princeton’s district. Her contact info is below:

Washington, DC Office
1535 Longworth House Office Building
Washington, DC 20515
Phone: (202) 225-5801
Fax: (202) 225-6025

New Jersey is represented by Cory Booker and Bob Menendez in the Senate. Their contact info is below:

CORY BOOKER

Washington, DC Office
359 Dirksen Senate Office Building
Washington, DC 20510
Phone: (202) 224-3224
Fax: (202) 224-8378

BOB MENENDEZ

Washington, DC Office
528 Hart Senate Office Building
Washington, D.C. 20510
202.224.4744
202.228.2197 (fax)

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