dariusi Posted April 15, 2013 Share Posted April 15, 2013 Here's a thread where we can share helpful notes on how to pay for expenses during grad school. Keeping it to the econ PhD forum in case people want to talk about NSF or anything else where an econ perspective would be helpful. To start, everyone should note that the Lifetime Learning Credit gives you a tax credit of 20% off the first $10,000 that you spend on education. Because it's a credit, you can claim this even if you have no income. You DO, however, have to file a federal tax return to get it (obviously). Quote Link to comment Share on other sites More sharing options...
ForbiddenDonut Posted April 15, 2013 Share Posted April 15, 2013 According to IRS on what qualifies as expenses for the LLC: Publication 970 (2012), Tax Benefits for Education "'Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment)" I note that because for a lot of people here with fully-funded offers, you'll have no tuition expense, but you might have $1K-$2K in annual fees and hundreds of dollars in textbooks. Quote Link to comment Share on other sites More sharing options...
sanda Posted April 15, 2013 Share Posted April 15, 2013 I note that because for a lot of people here with fully-funded offers, you'll have no tuition expense, but you might have $1K-$2K in annual fees and hundreds of dollars in textbooks. Good to know. I will have to price that in when price comparing books. Ie. purchase from amazon won't qualify. Quote Link to comment Share on other sites More sharing options...
RonSwanson Posted April 16, 2013 Share Posted April 16, 2013 I've always been able to claim textbook purchases from Amazon, just make sure you keep receipts if you get audited. Quote Link to comment Share on other sites More sharing options...
ForbiddenDonut Posted April 16, 2013 Share Posted April 16, 2013 This might be a resounding no, but is anyone considering buying a house? Tallahassee property seems pretty dirt cheap, I'll be living there for 5 years, and I can probably put 20% down on a decent-enough starter home. The problem is convincing a bank to finance on a 20K/yr stipend. Quote Link to comment Share on other sites More sharing options...
Canuckonomist Posted April 16, 2013 Share Posted April 16, 2013 This might be a resounding no, but is anyone considering buying a house? Tallahassee property seems pretty dirt cheap, I'll be living there for 5 years, and I can probably put 20% down on a decent-enough starter home. The problem is convincing a bank to finance on a 20K/yr stipend. A colleague of mine bought a condo in our first-year here in Toronto. While the condo boom may go bust in the next couple years, zhe's easily made 10% a year for the last 4 on this unit. It may be worth it, if you believe that house prices will go up over the next half-decade. Quote Link to comment Share on other sites More sharing options...
ForbiddenDonut Posted April 16, 2013 Share Posted April 16, 2013 I know that there are a lot of extra costs over a mortgage payment and time committments with owning a home that don't exist with renting, but I think as long as prices don't go down then building equity in a piece of real estate might be better than renting. Quote Link to comment Share on other sites More sharing options...
hedgequant Posted April 16, 2013 Share Posted April 16, 2013 This might be a resounding no, but is anyone considering buying a house? Tallahassee property seems pretty dirt cheap, I'll be living there for 5 years, and I can probably put 20% down on a decent-enough starter home. The problem is convincing a bank to finance on a 20K/yr stipend. Coming from home ownership for the last 7+ years, my wife and I decided against a home for a couple of reasons, even though finances were not one of them. For some added information to consider: -In your case you will almost certainly not get a good financing package. One rough metric that almost all places use is that your mortgage or lease payment should not be more 1/3 of your gross monthly income. At 20k per year you are less than 2k gross per month meaning your mortgage will have to be something like $600/month (and that is before taxes and insurance, which can be escrowed into your monthly payment). Even with historic lows on mortgages and good credit if you have it, this is going to be a stretch. -Maintenance: the Mitch Hedberg joke about the "Apartment Depot" (where everyone is standing around because they don't have to fix sh!t) is appropriate. Older homes (especially the kind you will likely be able to afford) will come with tons of quirks. The last thing you want to do is spend your time and money on fixing up things that will inevitably go wrong with any home. The biggest reason we are not getting another house is the hassle of maintenance is not worth it. -Selling: Ok, so if you are an American under the age of about 60 you have been sold a story that houses do not depreciate in value. You buy one, then you sell it later and make money. Admittedly this has been the fast majority of the total experiences with home ownership, but if you don't have long enough to build up equity in your home (and look at your 5 year amortization table to see just how little you will have), you are taking a massive risk. I am fortunate that the Austin housing market is crazy good right now, but as little as 2 years ago selling our home would have been a massive cash loss. You need to think long and hard about the potential risk (and reward, too) of having a home that you essentially *have* to sell at some point between now and t+5. Quote Link to comment Share on other sites More sharing options...
hedgequant Posted April 16, 2013 Share Posted April 16, 2013 I know that there are a lot of extra costs over a mortgage payment and time committments with owning a home that don't exist with renting, but I think as long as prices don't go down then building equity in a piece of real estate might be better than renting. To give you an example in a part of the world that was somewhat immune to the massive bubble popping, the difference in the market price of our home 2 years ago and today was about $65,000 USD. Even with 7 years of "equity" (or about $13,000 total on a roughly $2600/month house payment...) we would have been in deep trouble if we had to sell. Quote Link to comment Share on other sites More sharing options...
chuisle Posted April 16, 2013 Share Posted April 16, 2013 (edited) Huge question: Taxes. So I know that I have to pay taxes on the NSF money and most of you will need to pay taxes on your stipend but how much do I put back? I don't want to be blinded sided come tax season. Plus, there are probably another billion tax related complications I don't know enough about to even ask. Qualification: I realize that any information given here is not certified financial advice and the poster is not liable. (So people who have experience please post and help us) Edited April 16, 2013 by chuisle qualification Quote Link to comment Share on other sites More sharing options...
hedgequant Posted April 16, 2013 Share Posted April 16, 2013 Huge question: Taxes. So I know that I have to pay taxes on the NSF money and most of you will need to pay taxes on your stipend but how much do I put back? I don't want to be blinded sided come tax season. Plus, there are probably another billion tax related complications I don't know enough about to even ask. If you are required to set your own withholding percentage for NSF money, I would take out about 15%. That should be enough to avoid any unpleasant tax day realizations. You can also look up what your tax bracket will be and estimate your gross income. You will be able to deduct certain things to lower your income (what they call adjusted gross income, AGI). In some sense, taxes will be what they will be and it's up to you if youd rather be more likely for a big refund or a big payment. You can look at a big tax refund as "overpaying" throughout the year and effectively giving the government an interest free loan with your money. On the other hand you can take an interest free loan from them, payable each April 15th. Most people prefer to get a refund, even if that means less budget throughout the year, because it *feels* like extra money. If you know anyone with tax experience, you might even be able to save a bunch on taxes by incorporating yourself and treating your NSF as business income, and deducting expenses for supplies, travel, etc. so that you are paying tax on net income. I do this with my tutoring self-employment and it works very well and is not hard at all. You can even get away with just doing a "Schedule C" with your taxes if you can classify yourself as self-employed. For those that are partially or non-funded, and have to make some income, this is a good option. Quote Link to comment Share on other sites More sharing options...
RonSwanson Posted April 16, 2013 Share Posted April 16, 2013 So glad I won't have self employment income be a big part of my income this year. Quote Link to comment Share on other sites More sharing options...
chuisle Posted April 16, 2013 Share Posted April 16, 2013 If you are required to set your own withholding percentage for NSF money, I would take out about 15%. That should be enough to avoid any unpleasant tax day realizations. You can also look up what your tax bracket will be and estimate your gross income. You will be able to deduct certain things to lower your income (what they call adjusted gross income, AGI). In some sense, taxes will be what they will be and it's up to you if youd rather be more likely for a big refund or a big payment. You can look at a big tax refund as "overpaying" throughout the year and effectively giving the government an interest free loan with your money. On the other hand you can take an interest free loan from them, payable each April 15th. Most people prefer to get a refund, even if that means less budget throughout the year, because it *feels* like extra money. If you know anyone with tax experience, you might even be able to save a bunch on taxes by incorporating yourself and treating your NSF as business income, and deducting expenses for supplies, travel, etc. so that you are paying tax on net income. I do this with my tutoring self-employment and it works very well and is not hard at all. You can even get away with just doing a "Schedule C" with your taxes if you can classify yourself as self-employed. For those that are partially or non-funded, and have to make some income, this is a good option. Thanks...that's about what I was thinking. The incorporated idea is intriguing and may be worth it. I know some tax attorneys so I will inquire with them. Quote Link to comment Share on other sites More sharing options...
ForbiddenDonut Posted April 16, 2013 Share Posted April 16, 2013 To give you an example in a part of the world that was somewhat immune to the massive bubble popping, the difference in the market price of our home 2 years ago and today was about $65,000 USD. Even with 7 years of "equity" (or about $13,000 total on a roughly $2600/month house payment...) we would have been in deep trouble if we had to sell. I know yours is just an example, but I would be looking at homes priced in total in the ballpark of the amount your home changed in price over the past two years and would be paying a sizeable down payment. Like I said, property seems fairly cheap in Tally even if you ignore the foreclosures and homes "in need of a little TLC." You make some excellent points though. FWIW, this would probably be worthless in the eyes of a bank, but I would have a verbal agreement with my girlfriend to pay a few hundred in "rent" to put towards my monthly payments. I would personally plan my budget around the chance that that "rent" could "go away" at any time but it's there. Quote Link to comment Share on other sites More sharing options...
to2012 Posted April 16, 2013 Share Posted April 16, 2013 Does anyone here know the story about federal student loans for those with fully-funded offers? At every school that I have visited I have encountered lots of stories of people that are fully funded taking extra federal loans to cover living expenses. How exactly does this work? Loans are only made available to those with financial need and I would imagine that the federal financial need, while an extreme understatement of actual living costs, is probably met by most financial aid packages. However, the reality seems to be that these fully-funded students aren't really restricted in the amount of federal loans that they have access to. What gives? Quote Link to comment Share on other sites More sharing options...
RonSwanson Posted April 16, 2013 Share Posted April 16, 2013 Are you sure they weren't taking out private student loans? Quote Link to comment Share on other sites More sharing options...
Insti Posted April 16, 2013 Share Posted April 16, 2013 In case you guys care, here is an European perspective on home ownership. Take all the extra time you have to put in when you actually own a home so all that is left is the money factor. I would never ever buy a home unless I would pay less for it than what I would have if I was renting. Maybe you can allow for a $10k-$20k discrepancy as the minimum you can sell your house for after you move out. The reason is because for me (and I would argue most of Europeans) a home is a consumption good. I don't see buying a home as an investment more than I see buying clothes as an investment, Ultimately it is a good that you purchase in order to consume and resell when you no longer need it. Moreover, hoping that prices would go up when you decide to sell is pure speculation based on no rigorous analysis. Are you willing to put $30k-$40k on a hunch that prices might go up? Keep in mind that "home owning" and the pride in "home ownership" is a phenomenon that is prevailing in America and it is bound to affect your decision of buying a house. Of course if you resell homes professionally it is a whole different story, but those people hope they will make a profit out of an empty house rather than the roof over their heads. Just my 2 cents. Quote Link to comment Share on other sites More sharing options...
Catrina Posted April 16, 2013 Share Posted April 16, 2013 FD, how do monthly mortgage payments compare to rent down there? Quote Link to comment Share on other sites More sharing options...
srb1221 Posted April 16, 2013 Share Posted April 16, 2013 Loans are only made available to those with financial need and I would imagine that the federal financial need, while an extreme understatement of actual living costs, is probably met by most financial aid packages. ... What gives? Unless you're getting about $25k financial aid package, this is not the case. I live in one of the cheapest areas to live in the US, and my state school would let me take out >$30k in loans per year. After tuition (really cheap) that was like $25k per year in living expenses alone. The amount you can take out is based on the Cost of Attendence (COA) which is determined by the school. So, the idividual school "estimates" how much it will cost to pay tuition, live, commute, eat, have leisure time, etc. They set the upper bound on how much you can take out. However, if you're "creative" enough, you can negotiate that upper bound higher by saying "I need a computer for school" and BAM there's an extra $1000.00 (if you can show a receipt). It is surprising how much money some schools will let you take out, and again, my school is an incredibly low tuition school in a low housing cost area. You can imagine what the upper bound would be for a school in, say, NY, Chicago or LA. Quote Link to comment Share on other sites More sharing options...
ForbiddenDonut Posted April 16, 2013 Share Posted April 16, 2013 FD, how do monthly mortgage payments compare to rent down there? Mortgage payments (talking just principal and interest) seem to be a few hundred dollars less. There seem to be a lot of deals if you don't mind living in a small place in a boring area further away from the city center. I think the sticking point for me is that if I buy a house sub-80K and hold it for 5 years, I'll have 5 figures of equity as opposed to 5 years of renting which is 30-40K down the drain. One has to account for property taxes, extra utilities, maintenance, and insurance with home ownership, but the point still stands. Quote Link to comment Share on other sites More sharing options...
hedgequant Posted April 16, 2013 Share Posted April 16, 2013 I know yours is just an example, but I would be looking at homes priced in total in the ballpark of the amount your home changed in price over the past two years and would be paying a sizeable down payment. Like I said, property seems fairly cheap in Tally even if you ignore the foreclosures and homes "in need of a little TLC." You make some excellent points though. FWIW, this would probably be worthless in the eyes of a bank, but I would have a verbal agreement with my girlfriend to pay a few hundred in "rent" to put towards my monthly payments. I would personally plan my budget around the chance that that "rent" could "go away" at any time but it's there. All good points. If you do go down this path, perhaps you could draw up a contract for the extra income so the bank would actually care about it. Also, keep in mind maintenance... Quote Link to comment Share on other sites More sharing options...
ForbiddenDonut Posted April 16, 2013 Share Posted April 16, 2013 I really have to talk to a bank or two first to see if what I'm thinking of is at all realistic. Also, keep in mind maintenance... I'm on it. [ATTACH=CONFIG]6781[/ATTACH] Quote Link to comment Share on other sites More sharing options...
hedgequant Posted April 16, 2013 Share Posted April 16, 2013 I really have to talk to a bank or two first to see if what I'm thinking of is at all realistic. I'm on it. http://www.www.urch.com/forums/attachments/phd-economics/6781-2013-grad-school-finances-thread-scotts-reel-mower.jpg There are very few things in the world that I literally "hate", but yardwork is one of them. Quote Link to comment Share on other sites More sharing options...
Catrina Posted April 16, 2013 Share Posted April 16, 2013 Putting mowing aside, the main expenses of home ownership are often things that you can't really do yourself, like fixing plumbing problems or whatever Quote Link to comment Share on other sites More sharing options...
ForbiddenDonut Posted April 16, 2013 Share Posted April 16, 2013 Putting mowing aside, the main expenses of home ownership are often things that you can't really do yourself, like fixing plumbing problems or whatever I think I've watched enough sitcoms on TGIF to know how to avoid all the pitfalls of DIY plumbing jobs. Quote Link to comment Share on other sites More sharing options...
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