Thats the gist. The main problem is the lack of distinction between finincial aid or graduate fellowships and other forms of "unearned income". This lack of distinction leads to a graduate student's only source of income (a fellowship) being taxed as if it was a gift handed down by a rich parent.

It is a gift handed down by a rich parent — the parent in this case is the university. There is no difference. Someone is handing you thousands of dollars and they say: “here is some money for your school, in order to keep getting this money, you have to get good grades and volunteer as a teaching assistant.” How is that any different than a rich parent giving you the same money with the same conditions? At the end of the day, some benefactor is handing you a pile of money to get an advanced degree.

It seems you may be unfamiliar with STEM Ph.D programs. The way it works is professors "sponsor" a graduate student to do reserach for them. The student will either work on existing projects started within that professor's lab or start their own related projects. The goal of this research is to contribute novel material into scientific literature.

It's also usually NOT a rich parent. For example a big funder is NSF or NIH, these institutions grant money to labs with the expectation that they will perform research.

Don't think of it as being paid to go to class, think of it as a job where you work 40 hours a week (usually way more) doing reserach, then go to class, then on top of that help teach those classes through being a TA.

Those cases really should count as earned income then.

Indeed, and I'm surprised it wouldn't be. When I was a graduate student we got tuition waivers but beyond that it was a salary for being a teaching or research assistant. TAs were definitely considered employees, because they were also union-represented.

That’s the standard, not the exception, for PhDs. Which is why it’s not really “those cases” that should be earned income - its the entire category.

Graduate students work to earn their keep. They are more properly treated as employees: https://www.npr.org/sections/thetwo-way/2016/08/23/491090762...

Are you telling me you have a hard time discerning between a trust fund and an educational grant or stipend?

From a taxation perspective, yes. If it’s earned income, then the university should put the “student” on a W2 and pay then as such. Otherwise, it’s unearned income and I mean “unearned” in terms of tax treatment; that doesn’t imply that it isn’t deserved. A day trader makes unearned income, but nobody could argue that doing that isn’t “work.” But the IRS still considers that also unearned.

I am all in favor of cutting taxes on unearned income. However ironically, those most opposed to that also like to complain when it’s their unearned income being taxed as in the case of a stipend or fellowship.

shouldnt the annual gift exclusion of 15k apply then?

I mean it’s crazy. God forbid they contribute toward the free health care they get until 26-the nerve of those evil republicans and their responsibility nonsense

since when is being a poor kid trying to get an education a lack of responsibility? if anything, folks like that have more than enough on their plates without a bunch of jerks -- of any political leaning -- kicking down at them as they try to build a better life for themselves and their families. to your point down-thread, student aid packages tend to lift you over the very low threshold of medicaid eligibility last i knew. if you think being broke enough to be on medicaid or qualifying for need-based aid is easy street, you are waaaaaaay off base.

Who the hell is getting "free health care" until they're 26? If you come from a low-income family, there's a damn good chance you're uninsured.

They have something called Medicaid, you should go read about it before you fall for the NYT agenda. It’s the people in the middle that get screwed, and it’s not just a republican issue

I don't know about you, but I grew up dirt poor and on Apple Health (WA's version of Medicaid) which did the bare minimum for my health. Not to mention it had zero dental coverage at a time when I was going to college with teeth quite literally rotting out of my head, broken down to the gums and with occasional abscesses.

And that's only because my parent's combined income was effectively $0, because neither of them could work due to severe disability. You can look at the income limits [1] and see that you basically have to be living in abject poverty in order to qualify.

So I'd advise you to actually experience it before telling others to read about it.

[1] https://www.hca.wa.gov/health-care-services-supports/apple-h...

> It’s the people in the middle that get screwed

Medicaid doesn't cover even a majority of lower income or younger Americans.