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The maximum amount you are allowed to contribute to a Roth IRA in a given year is either a certain dollar amount or your “taxable compensation”, whichever is lower. Now I am a PhD student who gets scholarships along with a stipend. (I also get a TA salary, but it’s clear how to take that into account.) My question is, do either the scholarships or the stipend (or both) count towards “taxable compensation”?

My scholarships and stipend are not part of a W-2 form, and this website says that scholarships which are not part of a W-2 form do not count towards taxable compensation:

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But is that information correct?

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IRS Publication 970 states:

A scholarship or fellowship grant is tax free only to the extent:

  • It doesn't exceed your qualified education expenses;

  • It isn't designated or earmarked for other purposes (such as room and board), and doesn't require (by its terms) that it can't be used for qualified education expenses; and

  • It doesn't represent payment for teaching, research, or other services required as a condition for receiving the scholarship. For exceptions, see Payment for services, later.

If it meets those conditions, then it does not count towards gross income.

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  • First of all, Taxable Income and Taxable Compensation are not the same thing; they need not be equal. Second of all, my scholarship actually does count as Taxable Income. It exceeds my Qualified Education Expenses. It’s just not on a W-2.
    – Keshav Srinivasan
    Commented Mar 16, 2019 at 21:33
  • Gross Income is also a different thing from Taxable Compensation.
    – Keshav Srinivasan
    Commented Mar 17, 2019 at 3:28

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