Scholarships and Fellowships
Scholarship/Fellowship payments for U.S. citizens, Permanent Residents and U.S. tax residents are taxable but not subject to tax withholding unless a student specifically requests taxes to be withheld via federal and state W-4 forms. The payments may be considered taxable income and must be reported when filing your U.S. federal and state tax returns. Please see IRS publication 970 to assist in determining which portion of these payments is considered taxable income.
Tax withholdings ramifications
If you would like Payroll to withhold taxes, complete the Federal W-4 in myHR Self Service and IL W-4 Employee’s Illinois Withholding Allowance Certificate form by entering a specific dollar amount on line 6 for the federal W-4 and line 3 on the Illinois W-4.
Once you add the additional tax withholding, it is very important to know this extra withholding will continue on each payment you receive from the University until you submit new federal and state W-4s removing the additional amount. That means if you later switch to an assistantship payment (GA, RA, TA) or any other type of employment income (prize, additional pay, etc.) where regular federal and state taxes are withheld, you will then be taxed on the payment for BOTH the normal tax withholding and the additional amount you entered on the W-4s. To avoid this, make sure to stay alert to any funding changes. If you will be changing from scholarship/fellowship to another type of payment (or back), you must submit the federal and Illinois W-4 forms to the Payroll Office by the 15th of the month for the tax change to be effective for that month. Due to federal and Illinois tax laws, Northwestern is unable to refund any taxes to students that fail to adjust their W-4s by the required deadlines.
Taxes for nonresidents
Nonresident non-qualified scholarship/fellowship stipends are subject to 14% federal taxation, unless a tax treaty applies. Illinois state taxes are not withheld on non-service payments and any tax payments must be paid directly to the state.
Nonresident scholarship/ fellowship stipends that will be used for educational purposes outside the U.S. may be exempt from U.S. taxation if certain requirements are met. Please complete the Statement for Independent Educational Activities Conducted Outside the U.S. along with the appointment/position form.
Foreign nationals should visit our Pay and Tax Information for Foreign Nationals and Qatar Employees for more information.
Social Security (OASDI) and Medicare Tax for students
- Students who are enrolled full time will not have Social Security and Medicare (also called FICA) taxes withheld.
- Graduate students who enroll late may have these taxes withheld from their monthly payments. The Graduate School publishes the dates by which students must enroll by to avoid these taxes.
- To receive a refund of Social Security and Medicare tax taken from your monthly check due to late enrollment, you must send the payroll office a copy of both your check stub showing the tax was withheld and a copy of your schedule or other proof of full-time student status. Your tax will be refunded within 30 days.
NRSA postdoctoral trainees
- National Institutes of Health (NIH) National Research Service Award (NRSA) postdoctoral trainees continue to retain their trainee status. Information on this can be found on the NRSA web page from the Office of Sponsored Research.
- NRSA post-docs do not have tax withheld or wages reported on Form W-2 at the end of the year. They must report all amounts paid that are not used for qualified expenses (tuition, books, etc.; please refer to IRS Publication 970).
- NRSA post-docs can have tax withheld by completing Federal Form W-4 and Illinois Form W-4 requesting “Additional amount” to be withheld estimating the amount of tax that will be owed on their taxable fellowship.