Most stipends are taxed as ordinary income

Whether you owe taxes on a stipend depends on what the stipend is for and who is paying it. The Internal Revenue Service (IRS) treats most stipends as taxable income, meaning you report them on your tax return the same way you would report wages or salary. The payer — your employer, school, or organization — may or may not withhold taxes from the payment, but that does not change whether the income is taxable.

The key distinction is whether the stipend is compensation for work or services or a non-taxable grant or award. A stipend paid to you for performing duties, attending classes, or meeting other conditions is almost always taxable. A stipend that is a true scholarship or fellowship used only for tuition and required books may not be, but those are rare and have strict rules.

Key Takeaways

  • Stipends paid for work, teaching, research, or other services are taxable income and must be reported on your tax return.
  • If the payer does not withhold taxes, you may owe money at tax time, so set aside funds or make quarterly estimated tax payments.
  • Scholarships and fellowships used only for tuition and required course materials may be non-taxable, but housing stipends and living allowances are always taxed.
  • The payer should send you a Form 1099-NEC or W-2 by January 31 if the stipend is taxable; if they do not, you still owe taxes on the income.
  • State and local taxes may also apply to stipend income, depending on where you live and work.

When a stipend counts as taxable wages

A stipend is taxable income if you receive it in exchange for work, services, or meeting performance conditions. This includes teaching stipends, research stipends, internship stipends, and stipends paid to graduate assistants or teaching fellows. It also includes housing stipends, living allowances, and any other payment tied to your role or status.

If you are an employee and the stipend is part of your compensation package, your employer should withhold federal income tax, Social Security tax, and Medicare tax from the payment. You will see it on your W-2 at the end of the year. If you are an independent contractor or the payer treats the stipend as a one-time payment, they may issue a Form 1099-NEC instead, and no taxes will be withheld — meaning you owe the full amount at tax time.

The amount of the stipend does not matter. Even a small monthly stipend of $100 or $200 is taxable if it is paid for services or conditions. The payer's failure to withhold taxes does not make the income non-taxable; it only means you will owe taxes when you file.

Scholarships and fellowships: the narrow exception

A scholarship or fellowship may be non-taxable, but only if it meets strict IRS rules. The money must be used only for tuition, fees, books, supplies, and equipment required for your course of study. It cannot be used for room, board, travel, or any other living expenses. If any part of the scholarship or fellowship is used for living expenses, the entire amount becomes taxable.

Additionally, you must be a degree candidate — a student enrolled in a program leading to a recognized degree. If you are not pursuing a degree, or if you are a postdoctoral fellow or researcher, the scholarship or fellowship is taxable. Many graduate stipends are taxable for this reason: they are paid to people who are not degree candidates, or they are used for living expenses, or both.

The payer should tell you on Form 1098-T or in writing whether the scholarship or fellowship is taxable. If you are unsure, ask them directly before you file your return.

What happens if taxes are not withheld

If you receive a stipend and the payer does not withhold taxes, you are still responsible for paying those taxes. You must report the income on your tax return when you file. Depending on how much you earn and your other income, you may owe a significant amount at tax time.

If you receive stipend income throughout the year and expect to owe more than $1,000 in taxes, you may be required to make quarterly estimated tax payments to the IRS. These are due on April 15, June 15, September 15, and January 15. Failing to make these payments can result in penalties and interest, even if you pay the full amount when you file your return.

To avoid a large bill at tax time, set aside 20 to 30 percent of each stipend payment in a separate account. This gives you a buffer for federal taxes, state taxes (if applicable), and self-employment taxes if you are an independent contractor.

Reporting stipend income on your tax return

When you file your federal income tax return, you report taxable stipend income on the form that matches how you received it. If the payer issued a W-2, you report the stipend on Form 1040 as wages. If they issued a Form 1099-NEC, you report it on Schedule C (if you are self-employed) or Schedule 1 (if you are not). If they issued neither form and the stipend was under $600, you still report it — the absence of a form does not mean the income is not taxable.

Keep records of all stipend payments you receive, including emails, pay stubs, or bank statements showing the deposits. If the payer sends you a form with an incorrect amount, contact them immediately to request a corrected form. Do not file your return with the wrong amount; the IRS will catch the discrepancy and send you a bill with penalties.

If you received a stipend in a prior year and did not report it, you can file an amended return (Form 1040-X) for that year. It is better to amend voluntarily than to wait for the IRS to contact you.

State and local taxes on stipends

In addition to federal income tax, you may owe state and local income tax on stipend income. Most states tax wages and self-employment income the same way the federal government does. A few states (Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming) do not have a state income tax, so you would owe only federal tax if you live and work in one of those states.

Some cities and counties also impose local income taxes. If you live in one of these jurisdictions, you must report your stipend income to the local tax authority as well. Your employer or the payer may withhold local taxes automatically, or you may need to file a separate local return and pay directly.

If you work in one state but live in another, you may owe taxes in both places. Some states have reciprocal agreements that prevent double taxation, but you will need to file in both states and claim a credit on one return for taxes paid to the other. This is complex, so consider consulting a tax professional if your situation involves multiple states.

Frequently Asked Questions

Do I have to report a small stipend if it is under $600?

Yes. The $600 threshold applies only to when a payer must issue a Form 1099-NEC. You are required to report all taxable income on your tax return, regardless of the amount. If you do not report it and the IRS finds out, you will owe back taxes, penalties, and interest.

What if my stipend is called a "grant" or "award" instead of a stipend?

The name does not matter. What matters is what the money is for and whether you had to do something to receive it. If you received it in exchange for work, teaching, research, or other services, it is taxable income even if it is called a grant. If it is a true scholarship for tuition only and you are a degree candidate, it may be non-taxable — but ask the payer to confirm.

Can I deduct my stipend as a business expense?

No. A stipend is income, not an expense. You report it as income on your tax return. You cannot deduct it. However, if you use part of the stipend to pay for work-related expenses (supplies, equipment, travel for your job), you may be able to deduct those expenses separately, subject to IRS rules and limits.

What if the payer sends me a W-2 but I think the stipend should be non-taxable?

Contact the payer and explain why you believe the stipend is non-taxable. If they agree, ask them to issue a corrected W-2. If they disagree or do not respond, report the income as shown on the W-2 when you file. If you still believe it is non-taxable, you can claim a deduction or credit on your return, but you will need to document your position and be prepared to defend it if the IRS questions it.

Do I owe self-employment tax on a stipend?

If you are an employee and the payer issued a W-2, you do not owe self-employment tax; your employer withheld Social Security and Medicare taxes. If you are an independent contractor and the payer issued a Form 1099-NEC, you owe self-employment tax (about 15.3 percent) in addition to income tax. Self-employment tax covers Social Security and Medicare for people who are not employees.