Graduate Students, Expect a Major Tax Hike If the Home Tax Plan Is Passed
By the end of the year, we need to know where we are with the massive tax reform plan now being discussed in Congress . Currently, however, there is one group that could face a huge tax hike: graduate students.
The House version of the tax plan proposes to exclude certain tax breaks, such as the student loan interest deduction, but it does include some tax breaks, including an increase in the standard deduction. While some of these benefits will fade over time, the New York Times reported that most taxpayers will benefit in the short term (especially the richest taxpayers), although economists warn that this will lead to a $ 1.4–1.5 trillion deficit .
However, as noted by NPR’s All Things Count, many graduate students will see a “massive tax hike” with House’s version of the tax plan. This is due to the fact that many graduate students teach or work with professors, and instead of the traditional salary, they receive a small scholarship and refuse to study. NPR explains:
“Technically, the cost of studying at MIT is about $ 50,000, although students like Ostrom don’t have to pay it. According to a tax plan proposed by House Republicans, these students will have to report tuition forgiveness as income … About 145,000 graduate students received tuition cuts in 2011-2012, according to the American Board of Education.
In other words, if you’re a graduate student, you already have to pay taxes on your probably modest scholarship, but with this tax bill, you’ll also have to pay taxes on dropout. Nothing has been set in stone yet, but if you are going to graduate school or planning to go to graduate school, you should pay attention to this. For more details, head over to the full NPR story here.