In 1986 the United States government passed a Tax Reform Act that only partially allows the financial assistance provided through a scholarship or fellowship to be exempt from taxes. Only those items directly related to a degree fellow’s academic program such as tuition and fees, books and materials and supplies, are exempt. Funds for food and incidental expenses, housing and health insurance provided by the East-West Center from United States Federal funding sources, are subject to U.S. government taxes. 

Some students may be exempt from U.S. government taxes by virtue of tax treaties that the United States government has signed with a number of countries. While provisions vary from country-to-country, treaties with such countries as China, Indonesia, Korea, Thailand, and the Philippines will exempt most degree fellows from paying U.S. government taxes on their East-West Center degree fellowship. Specific treaty benefits for each nation can be found in Internal Revenue Service Publication 901. 

For non-resident students from all other countries, the Center is required by law to withhold taxes each month at a 14% rate of all taxable items (housing, health insurance and monthly stipend). Below is an example of an estimated standard monthly stipend calculation for the month of September 2024.

The State of Hawai‘i also taxes that portion of the Center fellowship that provides for food and incidental expenses, housing and health insurance, but at a lesser rate. All students, including those from tax treaty countries, are subject to State of Hawai‘i taxes as tax treaties only exempt United States Government taxes. Since the State does not have a withholding capability for non-employees, all students are encouraged to pay estimated State of Hawai‘i taxes or set aside enough funds to pay these taxes when they are due.