Roth IRA Contribution for Grad Student at Cornell

Forum|Forum|2 years ago
April 4, 2024
2 replies
0 views

I receive a 1098-T with amounts reported in boxes 1 and 5. I get conflicting answers on the web. Can I contribute to an IRA if this is my only income?

TurboTax Home & Biz Windows

HydroSciAuthor

I forgot to add this:

Language from the Graduate Student Savings Act, which FASEB endorsed, was incorporated into the SECURE Act of 2019, eventually becoming law in December 2019. This change in Public Law 116–94, defines fellowship stipend payments for graduate students and postdoctoral researchers as compensation for the purpose of contributing to an individual retirement arrangement (IRA) account. Prior to this language being incorporated into law, fellowship monies were largely ineligible to be contributed to an IRA.

https://www.faseb.org/journals-and-news/washington-update/irs-clarifies-guidance-for-fellowship-stipend-contributions-to-iras

AmyC

Employee

Yes, you can contribute to an IRA with scholarship funds.

About Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) page 7 shows scholarship income does qualify as compensation for purposes of an IRA and you can review the rules for your situation and type of IRA.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

Hal_Al

Employee

If any of your scholarship is taxable (usually the difference between box 5 and box 1 of the 1098-T, when box 5 is larger), that amount counts as compensation for purposes of an IRA contribution.

Note: This rule does not apply to undergrad students.

HydroSciAuthor

"usually the difference between box 5 and box 1 of the 1098-T, when box 5 is larger" - My box 5 is approximately $4k greater than box 1. Is that actually the number that I should use? TurboTax says that I cannot contribute.

Hal_Al

Employee

To qualify for the IRA contribution, two things need to happen in TT. 1. The taxable scholarship should show up on line 8r of schedule 1 (so that it is identified as scholarship/stipend "compensation"). 2. You must identify yourself as a grad student. This usually happens by checking the grad student box on the 1098-T.

Starting in 2022: During the IRA contribution interview, you will get a screen "How much of the taxable Scholarship was for Graduate or Post-Doctoral Studies". You will need to enter the amount that applies to it here.

https://ttlc.intuit.com/community/retirement/discussion/re-error-in-turbotax-handling-of-new-schedule-1-line-8r-scholarship-income-for-determining-ira/01/3016014#M199026 (screen shot)