Are Stipends Taxable? Everything You Need to Know in 2026

While many assume that “stipend” means free money (and therefore non-taxable), the reality is that whether stipends are taxable depends on several factors, so, while most of them are subject to tax, there are some to which this doesn’t apply.

In this article, we’ll begin by explaining what a stipend is before diving into different types and their tax treatment. We’ll also explain how taxable stipends are reported and touch on their presence in pay stubs, so let’s get started!

What Is a Stipend?

A stipend is a fixed amount of money paid to an individual to cover a certain type of expense, such as housing, training, or well-being. While they are often mentioned in the context of an academic setting (e.g., for interns and researchers), stipends are common in employment, as well.

They are used as financial tools to support employees in their development and education or to cover specific expense needs. However, they are different from wages and salaries, because they aren’t determined by the hour and are not used as compensation for services rendered. They are also typically lower than a salary.

Here’s a concise table that outlines the key differences when comparing stipend vs salary for tax purposes:

Are Stipends Taxable?

In short, most stipends are taxable under the U.S. tax law. However, there are specific circumstances and types of stipends that can be excluded from taxes, though this depends on their nature and purpose.

Based on the IRS Publication 15-B, stipends are classified into three distinct categories:

1. Taxable benefits encompass stipends for expenses like housing, wellness, travel, and general support. While these aren’t wages in the exact sense, they are treated the same. This means they must be included as part of an employee’s gross income and reported on their tax return. Employees typically have to pay income tax on these stipends.
   
   
2. Non-taxable benefits are primarily used for qualified educational expenses, such as the cost of tuition and associated fees. These stipends may be non-taxable based on the IRS stipend rule about scholarships and grants. However, some conditions usually must be fulfilled, such as a stipend being used only for books and tuition at a degree-granting institution.
   
   
3. Pre-tax benefits occur in rare instances when stipends can be deducted from the employee’s gross salary before taxation. For example, these can be commuter expenses and parking, for which there are fixed amounts as to how much can be deducted. The IRS outlines the rules as to what type of vehicle can be used and which parking location.

Which Stipends Are Taxable?

Most stipends are taxable, whether they are given to students, interns, or employees. Whenever the funds are used for any type of personal costs (e.g., food, rent, gym membership), the IRS typically sees them that way.

Let’s see some of the most common categories:

#1. Internship and Fellowship Stipends

Internship and fellowship stipends are generally taxable if recipients use them to cover living expenses in exchange for their services.

For example, if you receive a summer stipend that you use to pay for food and an apartment while being a company intern, you have to pay taxes on the entire amount. Even if the company labels it as “living allowance,” that doesn’t change the nature of the payment or cancel the requirement to pay intern stipend taxes.

The only way to avoid internship and fellowship stipend tax is to use the funds on qualified and strictly educational expenses, such as tuition and relevant mandatory expenses.

#2. Living and Housing Stipends

Living and housing stipends are taxable in most cases. This encompasses funds provided to cover or offset the costs of rent or room, and these stipends are considered financial support, as they are usually not tied to tax-exempt activities.

Moreover, the stipends are taxable regardless of whether the employer gives you the sum to use on an apartment or pays your landlord directly. The value of the payment must be included in your gross income.

There are some rare exceptions in which living and housing stipends may not be taxable. This can happen, for example, if housing is on the employer’s business premises or for the employer’s convenience.

#3. Health and Wellness Stipends

Health and wellness stipends refer to funds given for gym memberships, exercise equipment (e.g., running shoes), health-related apps (e.g., for mental wellbeing, sleep, home workouts, etc.).

These stipends can only be non-taxable if they are a part of a tax-advantaged plan (like Health Reimbursement Arrangement (HRA) plans or Health Care FSA (HCFSA) plans).

However, since most wellness payments don’t qualify or meet strict IRS rules, they are 100% taxable. For instance, an employer adding $100 to your paycheck for wellness purposes will be treated as extra wages and taxed accordingly.

#4. Personal Travel Stipends

Personal travel stipends, such as money for vacation or allowance for being a digital nomad, are fully taxable. Since there are elements of leisure and the expenses aren’t for the direct benefit of the business, they are treated as supplemental wages by the IRS.

For instance, a remote company giving its employee a $1,000 personal travel stipend a year for “exploration” or “cultural enrichment” is likely 100% taxable and must be reported on the recipient’s tax return.

Business-related travels, on the other hand, can be reimbursed under accountable plans, and that may be excluded from your taxable income.

#5. Meal Stipends

Meal stipends are generally taxable, unless they are related to business trips and events. If an employer gives you a fixed monthly allowance for lunch and doesn’t ask for receipts (e.g., you’re receiving $300 on top of your salary to spend however you want on food), that money is taxable income.

Another common meal stipend that is usually taxable is when employees who work from home receive daily funds for lunch. However, occasional meals that are during work hours and at the workplace (strictly for the employer’s convenience) may be excluded from taxation.

Which Stipends Are Not Taxable?

Stipends are not taxable when they align with the IRS stipend tax rules and specific exclusions. This generally requires using stipends for very specific purposes and having all the necessary documentation to prove their use.

#1. Qualified Educational Stipends

To be qualified as tax-free, educational stipends typically need to fulfill the following criteria:

• A recipient needs to be a candidate for a degree at an eligible educational institution.
• The funds need to be used exclusively to pay for tuition and mandatory associated fees.

For example, let’s say a student receives a $10,000 educational stipend. Out of that sum, they use $8,000 on tuition and $2,000 on room and board. As a result, the $8,000 portion will be tax-free, while $2,000 of the stipend is taxable income.

Additional expenses, like books and equipment, can only be tax-free if they are mandatory for the course.

#2. Accountable Plan Reimbursements

Expense reimbursements made under an accountable plan are not taxable. However, for stipends to qualify as non-taxable reimbursements, the following criteria need to be met:

• Funds must be used for business-related expenses.
• Each expense needs to be substantiated with receipts (usually within 60 days of the initial payment).
• Any excess of the stipend (allowance) that wasn’t spent must be returned.

For example, if an employee receives a $500 stipend for attending a business conference, and they have receipts for $450 worth of expenses, they must return the remaining $50 to ensure tax-free treatment.

#3. Scholarships for Tuition and Required Fees

As previously mentioned, scholarships can be tax-free if they are used for tuition, required fees, and mandatory equipment. They must also be for eligible institutions that can issue a degree.

It’s important to note that any part of this stipend used for non-qualified expenses will be taxable. That means that any part of a scholarship used to pay for the room or optional materials will be taxed. Additionally, mandatory purchases (e.g., lab equipment that every student needs to purchase) may also be considered qualified expenses.

#4. Family Formation and Dependant Care Stipends

Employers can contribute to dependent care and family formation tax-free up to a certain IRS limit. For instance, in 2025, the IRS offered the Adoption Credit, where the expenses were limited to $17,280 per qualifying child. Payments beyond the limits generally become taxable compensation.

How Are Taxable Stipends Reported?

How taxable stipends are reported depends on the stipend and the recipient's classification (e.g., contractor, employee, student). Based on that, they may issue a form that will facilitate accurate stipend income reporting.

Stipends Reported on Form W-2

If the recipient is a legal employee, and a taxable stipend is a part of their wages issued through the payroll system, it will appear on their Form W-2. It will typically appear in Box 1 of Form W-2, under “Wages, tips, other compensation.”

This is common for:

• Graduate teaching assistants who receive compensation for their efforts.
• Interns who are legally classified as company employees and are getting paid.
• Employees who receive stipends for housing or wellness and are processed through payroll.

In the case of stipends being reported on Form W-2, employers may also withhold taxes (federal income, Social Security, and Medicare taxes). Additionally, you may also find these stipends on your pay stubs if you get them.

Stipends Reported on Form 1099

If you’re a self-employed individual (e.g., providing services as an independent contractor), you may receive a Form 1099-NEC after getting a stipend from the client. This form is used because the stipend is considered nonemployee compensation.

The critical thing to understand with your stipend being reported on Form 1099 is that you become responsible for paying both income and self-employment tax on the entire sum. The self-employment tax represents the full value of Social Security and Medicare taxes (15.3% of the stipend), instead of having an employer contribute half of it.

Another thing to keep in mind is that taxable stipends must be reported even if you don’t receive any form. Universities may not be required to issue any forms (1099 or W-2) for fellowship and scholarship stipends. However, you must still calculate and report this income when filing your tax return if you’ve used it for non-qualified expenses.

This is done using Schedule 1 of your Form 1040, under the “Scholarship and fellowship grants not reported on Form W-2.”

Do Stipends Appear on Pay Stubs?

Stipends will likely appear on your pay stubs if they are issued and processed through the payroll system. Apart from that, it’s also important where it will appear on your pay stub.

In general, taxable stipends will appear in the “Earnings” section of your pay stub. They can be labeled as “Stipend” but also as “Bonus, “Taxable Benefit,” or something similar.

It’s important to have a taxable stipend displayed transparently in this section to confirm that taxes are accurately being withheld from your paycheck. This will save you from an unexpectedly large tax bill during the tax season.

On the other hand, if a stipend is not taxable (or a non-taxable reimbursement to an employee made under an accountable plan), it can appear in a separate “Non-Taxable” section. It might also not appear on your pay stub at all, since it is not important for when you’re filing your taxes.

Distinguishing between taxable and non-taxable stipends, as well as knowing how to read and maintain your records, is essential for your financial well-being. If you aren’t receiving pay stubs from your employer, need them to be more detailed, or simply want to create these documents for personal records, you can take advantage of our pay stub generator.

Final Thoughts

Ultimately, whether stipends are taxable primarily depends on the purpose of the funds. Since, in most cases, the money ends up in your pocket or is spent on various personal expenses, the stipends are taxable and need to be reported during the tax season.

Still, it’s important to know which ones aren’t taxable to avoid overpaying your taxes. That’s why you should track every dollar you spend and maintain accurate documentation that details every stipend.

Plus, employees must keep the receipts associated with every business-related expense, while students should keep receipts for college tuition and books to maximize tax-free exclusions. If, at any point, you’re uncertain about the tax treatment, make sure to consult a tax professional.

Are Stipends Taxable FAQs

#1. Do student stipends count as income?

Student stipends count as income if they are used for expenses like room, board, travel, and optional equipment. Only the portion of a stipend used solely for tuition, relevant mandatory fees, and required books doesn’t count as income and isn’t taxable.

#2. Do I have to pay self-employment tax on a stipend?

Whether you have to pay self-employment tax on a stipend depends on its type and your classification. If a stipend is taxable and you’re not classified as a W-2 employee, you will likely have to pay self-employment tax on it.

#3. Are stipends taxed differently between states?

Stipends can be differently taxed between states in certain circumstances. While most states follow federal rules when it comes to taxable income, some states don’t levy income taxes, while others may have exclusions for certain educational grants. That’s why it’s critical to always check your state’s tax laws.