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title: "UCSF Graduate Student Taxes FAQ" | ||
author: Tamas Nagy | ||
layout: post | ||
tags: [random] | ||
--- | ||
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I'm currently a 2nd year graduate student in the quantitative biology program | ||
at UCSF. I am certainly no tax professional[^1], but I thought I would write a bit | ||
about what you can expect to pay in taxes at UCSF. These are some questions that | ||
I think I would have appreciated knowing the answers to in my first two years[^2]. | ||
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### Do we have to pay taxes? | ||
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Yes, both state and federal. The tricky part is that while you are paid by UCSF | ||
on a 1098t nothing is withheld so you have pay the full amount come April. | ||
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### How much should I set aside each month for taxes? | ||
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Most estimates are between $400-500 a month depending on your specific | ||
situation. I would probably aim for $425. | ||
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Now assuming that you did not have any external income, you should expect to pay | ||
roughly $2000[^3] in your first year since you are only taxed for October, November, and | ||
December. 2nd year you have to pay for the entire year and this works out to | ||
being close to $5000. It's a lot if you're not ready for it. | ||
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### How do I e-file for free? | ||
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There is no need to pay for e-filing since we make less than the limit for | ||
[IRS FreeFile](https://apps.irs.gov/app/freeFile/jsp/wizard.jsp?). Just fill out | ||
the form and select one of the free filing options. I have had good luck with | ||
TaxAct. | ||
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### Can we withhold taxes so that April isn't such a bummer? | ||
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Yes. In my opinion, the easiest and best way to do this to | ||
[set up estimated tax payments](https://www.irs.gov/uac/pay-taxes-by-electronic-funds-withdrawal) | ||
when you e-file. Your bank account is debited according to whatever | ||
estimated tax plan you submit. This is also nice because you do not have to pay | ||
the penalty for failing to withhold income[^4]. | ||
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### Can we contribute to a Roth IRA? | ||
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Unfortunately, to the best of my knowledge, we cannot. Since the money we make on a | ||
1098t is considered taxable, unearned income it does not qualify for IRA. However, | ||
the moment you are switched to a W2, you can contribute up to your earned | ||
income amount or $5500, which ever is smaller. | ||
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### What is a Roth IRA? | ||
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They are super cool, read more about them [here](https://www.bogleheads.org/wiki/Roth_IRA). | ||
Basically, they are a great way to save for retirement as a graduate student. | ||
Since we are in a very low tax bracket, you pay our low marginal tax rate now | ||
for the money you put in and all future earnings are tax-free for retirement. | ||
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### But what if I want to save for more immediate things than retirement? | ||
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Roths can still help you. You can always take the principal (the original | ||
money you contributed, not the earnings) out tax-free since you already paid taxes | ||
on it. Now I don't recommend this since you can't put that money back later due | ||
to the annual cap of $5500. But in an emergency, you can access the principal. | ||
Also, there are exceptions for removing earnings from a Roth without paying the | ||
penalty like substantial medical bills, first-time home purchase, etc. You have | ||
to be more careful with the rules here, see [this](http://www.rothira.com/roth-ira-withdrawal-rules) | ||
for more details. | ||
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[^1]: So YMMV on all this depending on your specific circumstances | ||
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[^2]: This post was inspired by a presentation by Kyle Barlow at iPQB journal | ||
club. Thanks Kyle! | ||
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[^3]: Naturally, this value will increase if the UCSF graduate student stipend | ||
increases. For reference, in my first two years, we made 34K (TY2015) and then | ||
36K (TY2016). | ||
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[^4]: This penalty was pretty small for me as a 1st and 2nd year because it | ||
is based on the previous tax year. It will be quite large in your 3rd year if | ||
you don't set up an estimated tax payment. |