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tlnagy committed Jun 1, 2017
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---
title: "UCSF Graduate Student Taxes FAQ"
author: Tamas Nagy
layout: post
tags: [random]
---
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].
### Do we have to pay taxes?
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.
### How much should I set aside each month for taxes?
Most estimates are between $400-500 a month depending on your specific
situation. I would probably aim for $425.
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.
### How do I e-file for free?
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.
### Can we withhold taxes so that April isn't such a bummer?
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].
### Can we contribute to a Roth IRA?
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.
### What is a Roth IRA?
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.
### But what if I want to save for more immediate things than retirement?
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.
[^1]: So YMMV on all this depending on your specific circumstances
[^2]: This post was inspired by a presentation by Kyle Barlow at iPQB journal
club. Thanks Kyle!
[^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).
[^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.

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