The Institute makes payments to members of the MIT community (beyond the regular semimonthly or weekly payroll cycle) for a range of purposes. Many of these payments have tax implications for recipients—whether US residents or nonresidents. MIT administrators can learn more about how these common payment types are defined by the IRS, how to process payments, and details about tax withholding and reporting. As a first step, it is best to determine the type of payment, using the definitions below.

Administering grants and stipends

Grants are payments given to an eligible grantee, which may be a student, MIT affiliate or other organization, for a designated purpose. Grants include the payment types listed below, as well as a few others. It is important to determine the specific type of grant in order to ascertain the proper taxability and reporting requirements.

Stipend is a general term that is not specifically defined by the IRS. Stipends may refer to any or multiple payment types. Therefore, you will need to determine the appropriate payment type as defined below.

Scholarships

Scholarships are amounts paid or allowed to a student for the purpose of study. Scholarship funds are intended to offset the cost of a student’s education for an upcoming or current academic year. Amounts paid by degree candidates for qualified expenses such as tuition, fees, and expenses required for coursework are not considered taxable income to the recipient. Conversely, amounts paid for non-qualified expenses such as room and board must be included in gross income and taxed appropriately.

Fellowships

Fellowships are amounts paid or allowed to an individual for the purpose of study or research. At MIT, fellowship payments are often referred to as “grants” or “awards” but if these payments are earmarked for study or research, they may be considered fellowships. Amounts paid by degree candidates for qualified expenses such as tuition, fees and expenses required for coursework are not considered taxable income to the recipient. Conversely, amounts paid for non-qualified expenses such as independent research travel expenses are included in taxable gross income. 

  • Targeted grants are amounts issued for activities undertaken in the public interest, not primarily for the private financial benefit of a specific person(s). These amounts are generally not taxable to the recipient.
  • If the fellowship requires certain services to be performed, it may be partially compensation income. 
  • Fellowship payments issued to nonresidents are subject to a 14% withholding tax.
Prizes and awards

Prizes and awards are amounts paid in recognition of an outstanding achievement or winnings in a competition, raffle, or other contest. When paying a prize or award, it is generally for a past performance. However, if the amount is intended for use in future research or study, the payment may be more properly categorized as a scholarship or fellowship.

Honoraria

Honoraria are payments that are often issued as a thank you for a professional service, such as a speaking engagement or guest lecture at MIT. These engagements are typically performed without the expectation of compensation. An honorarium is considered taxable income to the recipient.

Compensation

Compensation represents amounts paid for services rendered. This includes payments received in exchange for performing services as teaching assistants and research assistants at MIT.

Quick reference: Payment type, processing, and tax details

Payment Types Guide

The Details

Administering grants and stipends

Grants are payments given to an eligible grantee, which may be a student, MIT affiliate or other organization, for a designated purpose. Grants include the payment types listed below, as well as a few others. It is important to determine the specific type of grant in order to ascertain the proper taxability and reporting requirements.

Stipend is a general term that is not specifically defined by the IRS. Stipends may refer to any or multiple payment types. Therefore, you will need to determine the appropriate payment type as defined below.

Scholarships

Scholarships are amounts paid or allowed to a student for the purpose of study. Scholarship funds are intended to offset the cost of a student’s education for an upcoming or current academic year. Amounts paid by degree candidates for qualified expenses such as tuition, fees, and expenses required for coursework are not considered taxable income to the recipient. Conversely, amounts paid for non-qualified expenses such as room and board must be included in gross income and taxed appropriately.

Fellowships

Fellowships are amounts paid or allowed to an individual for the purpose of study or research. At MIT, fellowship payments are often referred to as “grants” or “awards” but if these payments are earmarked for study or research, they may be considered fellowships. Amounts paid by degree candidates for qualified expenses such as tuition, fees and expenses required for coursework are not considered taxable income to the recipient. Conversely, amounts paid for non-qualified expenses such as independent research travel expenses are included in taxable gross income. 

  • Targeted grants are amounts issued for activities undertaken in the public interest, not primarily for the private financial benefit of a specific person(s). These amounts are generally not taxable to the recipient.
  • If the fellowship requires certain services to be performed, it may be partially compensation income. 
  • Fellowship payments issued to nonresidents are subject to a 14% withholding tax.
Prizes and awards

Prizes and awards are amounts paid in recognition of an outstanding achievement or winnings in a competition, raffle, or other contest. When paying a prize or award, it is generally for a past performance. However, if the amount is intended for use in future research or study, the payment may be more properly categorized as a scholarship or fellowship.

Honoraria

Honoraria are payments that are often issued as a thank you for a professional service, such as a speaking engagement or guest lecture at MIT. These engagements are typically performed without the expectation of compensation. An honorarium is considered taxable income to the recipient.

Compensation

Compensation represents amounts paid for services rendered. This includes payments received in exchange for performing services as teaching assistants and research assistants at MIT.

Quick reference: Payment type, processing, and tax details

Payment Types Guide

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