<p>This summer I will be able to receive a stipend of about 2-3k for a summer research job/internship experience for undergraduates. </p>
<p>My questions are:
1. Do I need to file an income tax return? Is it considered a taxable or nontaxable income? Up to this date I never had the need to file tax returns.
2. What percentage of the 2-3k will my university demand as student contribution for the following semester?
3. Is my stipend eligible for me to start(officially open) a Roth IRA and make contributions? If so, what will happen to my university financial aid if I managed to contribute the stipend to my own roth ira? I understand they will not count it as a student asset, but view the contributions as unearned income. Will the university view this as demand for bigger contributions from me(the student's) part, in addition to the effects of #2?
4. What type of income protection is available for students? I believe I heard somewhere that up to 3000 a year is allowed, but I am not sure if it is for work study work only or not(my stipend is not considered work study).</p>
<ol>
<li>Do you have any other income? There are different filing limits for earned income, unearned income, combinations of earned and unearned income. For this year $5350 for earned, $850 unearned - not sure when there is both. I believe stipend income is generally considered taxable income. You would probably have to have some other income to be required to file.</li>
<li>Depends on your other income. If you are at a FAFSA school and your total income (not including work study and the taxable part of scholarships/grants) is over the protected income allowance ($3080 for 2008-2009) then 50% of the amount over $3080 goes to the EFC.</li>
<li>I would think it is eligible. You would need to check. Putting the money in a Roth will have no affect on your financial aid. It does not reduce your income for FAFSA purposes. It does not get included in assets for FAFSA.
4.$3080 income protection for 2008-2009 (work study and scholarships income are excluded from the EFC calculation by FAFSA).</li>
</ol>
<p>caveat - I am not a tax expert - just based on experience of filing my kid's returns and my own.</p>
<ol>
<li>I did not do work study this year so I will have no other sources of income. Work study is taxable income, correct?</li>
<li>At this point, I think only the ~3k would be the only income I would have earned.
3.4. Thanks for the info!</li>
</ol>
<p>The way I see it is that it could be a "safe" place to put a bit of money to pay off a possible 5th year combined bachelors/masters. I understand that the contributions(and not the interest) can be taken out as used before retirement age, and what little I have in this savings will not be deducted into the efc. Is this correct?</p>
<p>What you EARN in a year is included in the EFC. That means if you make 3k they will consider this income available.</p>
<p>What you put away into a Roth will not show up next year as being "savings" on your FAFSA because it is a retirement account. BUT you have to have some money left over from your income to stick into that account in the first place.</p>
<p>It is my understanding that principal (not accrued interest) in a Roth can be taken out after five (yes, count 'em 5) years. Which probably means you couldn't get to this "savings" until your 6th year of study.</p>
<p>In any case, you should run one of the FAFSA calculators with your different assumptions and see what comes up.</p>
<p>Maybe you should PM Taxguy (did I get his name right?) and ask for his advice about this.</p>
<p>
[quote]
What you EARN in a year is included in the EFC. That means if you make 3k they will consider this income available.
[/quote]
Not if it is the only income. A student has $3080 of protected income for 2008-2009 FAFSA. I think it increases a little (and I mean a little) each year.</p>
<p>The standard deduction for a dependent when they have both earned and unearned income is the earned income plus $250. Minimum $850 maximum $5350. That's for 2007</p>
<p>
[quote]
3. Is my stipend eligible for me to start(officially open) a Roth IRA and make contributions? If so, what will happen to my university financial aid if I managed to contribute the stipend to my own roth ira?
[/quote]
</p>
<p>You need a W-2 or 1099 for Roth IRA. I think it's also for earned income not stipend.</p>